Now that health insurance reform is signed into law, what is the impact on real estate brokers and sales associates?
First, if you are an individual who buys your own coverage and have a policy you like, your coverage would be “grandfathered” and would be considered “qualified coverage.” If you are an employer who already offers health insurance to your salaried workers, you may continue to offer the plan you have. Your existing plan is “grandfathered” and you are deemed in compliance with the new employer mandate. You may continue to enroll new employees and terminate those employees who leave the firm without jeopardizing this grandfathered status.
Second, the law creates a uniform, national set of insurance ratings and underwriting standards. These new rules spell out the criteria that insurers can use when evaluating an application. The goal of the new standards is to create a set of rules that more closely resemble what most folks think of as the rules that apply to a group policy.
Insurers can charge different premiums based on policy holders' factors such as age, the type of policy purchased, and geographic area. Insurers can't, however, deny coverage or base premiums on an applicant's preexisting condition, claims history or gender. This is a significant change from the current rules in the great majority of states.
Second, the law will seek to expand the individual and small-business insurance markets, which are the markets through which real estate brokers and sales associates principally shop for coverage.
The goal is to increase access to affordable coverage by increasing competition among insurers, in part by expanding the pools of insureds (with a new requirement for all individuals to have coverage), encouraging insurers to enter new markets, and by allowing markets to cross state lines, among other things. The eventual goal is to merge the individual and small group markets into one larger market. In either case, independent contractors will be able to shop for coverage in both the individual and the small-business markets, so their options will be increased.
Third, the law creates the insurance exchanges that received so much attention in the media. The exchanges are in effect the new insurance marketplaces through which individuals and small employers will shop for coverage. Because insurance ratings and underwriting standards are made more uniform under the law, shopping for coverage through the exchange’s online services or through an insurance broker is simplified, at least in theory, because comparison between plans is made easier.
Fourth, the law requires individuals to buy health insurance and gives incentives businesses to make health insurance available to their employees. That means practitioners will have to buy coverage if they don't already have it or face a penalty unless they can show they can't get coverage for less than a certain percentage of their income--10 percent--or or would otherwise face a financial hardship. If they can't get an exemption for one of these reasons, they pay a fine.
The employer mandate covers businesses with more than 50 employees. Most real estate brokerages, as small businesses with fewer than 50 employees (the sales associates, as independent contractors, don't count against the employee total), are expected to be exempted from the mandate. Large employers subject to the mandate that fail to comply face a penalty. Affordability credits, to help offset costs, are available to both individuals and very small employers, including very small nonprofit associations that are employers.
State and Federal Tax Credits Info.
For the federal incentive, contracts must be inked by April 30, while closings have to happen by June 30. The California credit covers closings on existing or new homes on or after May 1, leaving a short window for double dipping. Buyers will now be eligible for both the federal and state credit and will likely consume a significant piece of the state credit given the first-come, first-serve allocation.
Time Line possibilities:The tax credit will benefit about 14,000 new-home buyers, lasting as long as five months.
The State allotment could be snapped up in about a month. (10,000 homes)
Time Line possibilities:The tax credit will benefit about 14,000 new-home buyers, lasting as long as five months.
The State allotment could be snapped up in about a month. (10,000 homes)
Mortgage Forgiveness Debt Relief Act of 2007
IRS tells homeowners how to get tax relief if a lender forgives part of their debtGenerally, the Internal Revenue Service (IRS) treats debt forgiveness by a creditor as taxable income. However, under federal legislation that took effect in 2007, certain home mortgage debt cancellations—such as loan modifications, short sales, or foreclosures—may be exempted from federal taxes. Other exemptions are also available.
Homeowners considering a loan modification, short sale, or foreclosure should note that the federal tax exclusion under the Mortgage Forgiveness Debt Relief Act of 2007 only applies to mortgage balances on a qualified principal residence and not on second homes, rental real estate, or business properties.
The maximum amount of forgiven debt eligible under the 2007 law is $2 million for married taxpayers filing jointly and $1 million for single taxpayers.
The debt reduction only can be for loan amounts used to buy, build, or substantially improve a principal residence, including refinance loans as long as an increase in the total mortgage debt if any is attributable to renovations and capital improvements of the house. However, if refinance proceeds were used for other personal purposes, such as paying off credit card bills, purchasing cars, or investing in stocks, then the mortgage debt attributable to those expenditures is not eligible for tax exclusion under the 2007 law.
California homeowners who sold their house in a short sale or were foreclosed upon in 2009 still may have to pay state taxes on forgiven mortgage debt. The California legislature did not extend the tax exemption for mortgage debt forgiveness for state taxes. However, lawmakers are working on a bill that would provide the same tax relief on state taxes as the federal government currently offers.
Homeowners considering a loan modification, short sale, or foreclosure should note that the federal tax exclusion under the Mortgage Forgiveness Debt Relief Act of 2007 only applies to mortgage balances on a qualified principal residence and not on second homes, rental real estate, or business properties.
The maximum amount of forgiven debt eligible under the 2007 law is $2 million for married taxpayers filing jointly and $1 million for single taxpayers.
The debt reduction only can be for loan amounts used to buy, build, or substantially improve a principal residence, including refinance loans as long as an increase in the total mortgage debt if any is attributable to renovations and capital improvements of the house. However, if refinance proceeds were used for other personal purposes, such as paying off credit card bills, purchasing cars, or investing in stocks, then the mortgage debt attributable to those expenditures is not eligible for tax exclusion under the 2007 law.
California homeowners who sold their house in a short sale or were foreclosed upon in 2009 still may have to pay state taxes on forgiven mortgage debt. The California legislature did not extend the tax exemption for mortgage debt forgiveness for state taxes. However, lawmakers are working on a bill that would provide the same tax relief on state taxes as the federal government currently offers.
Greenspan: Housing Will Come Back
Former Federal Reserve Chair Alan Greenspan told officials in Mexico on Wednesday that he believes U.S. home prices have hit bottom. However, home owners are still unnerved by the decline in value, and until prices stabilize, the economy will remain weak.
"We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized, but they are very fragile," Greenspan said in a televised interview.
"Eventually housing will come back; it can't get any lower," he added.
Source: Reuters News (03/25/2010)
"We will not be out of this crisis until home prices truly stabilize in the United States. They appear to have stabilized, but they are very fragile," Greenspan said in a televised interview.
"Eventually housing will come back; it can't get any lower," he added.
Source: Reuters News (03/25/2010)
Browsing For Housing Requires On-line, Off-line Smarts
Nearly nine out of 10 home buyers can't be wrong -- browsing for housing online puts listings at their fingertips, speeds the home-buying process, and comes with an educational bonus.
"More informed buyers, improve the transaction process," says Douglas de Jager, co-founder of DotHomes.com one of the newer online listing services on the block.
The California Association of Realtors (CAR) reports that 84 percent of home buyers use the internet as a significant part of the home buying process, according to its 2009 Survey of California Homebuyers.
"There is so much more information made available to us online, when you go to the actual home, it's just a validation process for what you've seen online," de Jager adds.
But transforming digital digs into a real home of your dreams isn't just about bandwidth and educational content.
Using the Internet to buy a home comes with the same prerequisite necessary for any buyer -- get financing locked down first.
Certainly, the Internet can help with financing too. There are numerous mortgage comparison sites, virtually every lender is online and finance and credit information portals abound.
A home buyer with an approved mortgage -- obtained online or off -- has a negotiating edge and the financial boundaries necessary to help keep focused on a home that's truly affordable.
Only then is it time to surf for shelter.
DotHomes.com, a listing site with Google-like search features, offers these tips to help you get the most out of your online home shopping experience.
• Leverage the broker. Brokers and real estate agents are the housing market's matchmakers. They use local expertise to connect buyers and sellers. They've honed online tools to help you research, browse and focus your online search. The tools put you in touch with all the information and resources the listing agent or broker has to offer -- broker blogs, emailed updates tailored to your search, market reports tailored to your market, how-tos and other information.
• Search in real-time. Get property listings and other information electronically "fed" to you via RSS (really simple syndication) feeds, email alerts and Web updates. Electronic updates are an adjunct to your own time spent online. Alerts keep you abreast of the newest listings and reduce your need to manually check the Web again and again for updates. That's especially true when you are on the go, say driving from open house to open house. Blackberries, iPhones and other smart phones keep you connected to your search.
• Search "fresh." Avoid fringe listing sites that don't update frequently and are far removed from the original online broker's listing. If you don't, you'll miss out on listing changes and updates like new pricing information, new photos, open house dates and the like. Web sites that don't link to the original listing, lock you away from updates. Nothing is more frustrating than to find online what you consider your dream home only to soon discover that the listing was sold, removed from the market or otherwise changed beyond your requirements -- but not removed from an Internet server.
• Refine your search. Don't get overwhelmed. With so many listings on the market, both traditional listings and distressed properties, quickly navigating them all is a chore. Use online tools and Web sites that allow you to refine your property search. If you are looking for a house on a particular street, search the street. If you need a pet friendly condo, ask. Whether you know exactly what you want or are just starting to figure it out, be specific with search terms like "new roof," "three-car garage," "established landscaping," "new kitchen appliances," etc. to find the property with the features you need.
Along with the well known national listing Web sites from trade groups, large private listing portals and real estate companies, the local multiple listing service's (MLS) public access portal are among the best places to search on line because they use standard formatting and strict guidelines about adding and removing listings in a timely manner.
• Screen home movies. A picture is worth a thousand words, but a video, a virtual open house, looks like a million bucks. Kodak moments can help you get a two-dimensional feel for a property, but virtual tours add a third dimension. Videos offer a much better sense of the proportions and the feel of a property. They can also play the starring role -- as a sort of 24-hour open house -- on a Web site or blog dedicated to the listing.
Here's another browsing for housing bonus: If you buy a home with its own Web site and virtual tour, you can ask the seller to gift the Web site or blog to you!
Published: March 18, 2010
"More informed buyers, improve the transaction process," says Douglas de Jager, co-founder of DotHomes.com one of the newer online listing services on the block.
The California Association of Realtors (CAR) reports that 84 percent of home buyers use the internet as a significant part of the home buying process, according to its 2009 Survey of California Homebuyers.
"There is so much more information made available to us online, when you go to the actual home, it's just a validation process for what you've seen online," de Jager adds.
But transforming digital digs into a real home of your dreams isn't just about bandwidth and educational content.
Using the Internet to buy a home comes with the same prerequisite necessary for any buyer -- get financing locked down first.
Certainly, the Internet can help with financing too. There are numerous mortgage comparison sites, virtually every lender is online and finance and credit information portals abound.
A home buyer with an approved mortgage -- obtained online or off -- has a negotiating edge and the financial boundaries necessary to help keep focused on a home that's truly affordable.
Only then is it time to surf for shelter.
DotHomes.com, a listing site with Google-like search features, offers these tips to help you get the most out of your online home shopping experience.
• Leverage the broker. Brokers and real estate agents are the housing market's matchmakers. They use local expertise to connect buyers and sellers. They've honed online tools to help you research, browse and focus your online search. The tools put you in touch with all the information and resources the listing agent or broker has to offer -- broker blogs, emailed updates tailored to your search, market reports tailored to your market, how-tos and other information.
• Search in real-time. Get property listings and other information electronically "fed" to you via RSS (really simple syndication) feeds, email alerts and Web updates. Electronic updates are an adjunct to your own time spent online. Alerts keep you abreast of the newest listings and reduce your need to manually check the Web again and again for updates. That's especially true when you are on the go, say driving from open house to open house. Blackberries, iPhones and other smart phones keep you connected to your search.
• Search "fresh." Avoid fringe listing sites that don't update frequently and are far removed from the original online broker's listing. If you don't, you'll miss out on listing changes and updates like new pricing information, new photos, open house dates and the like. Web sites that don't link to the original listing, lock you away from updates. Nothing is more frustrating than to find online what you consider your dream home only to soon discover that the listing was sold, removed from the market or otherwise changed beyond your requirements -- but not removed from an Internet server.
• Refine your search. Don't get overwhelmed. With so many listings on the market, both traditional listings and distressed properties, quickly navigating them all is a chore. Use online tools and Web sites that allow you to refine your property search. If you are looking for a house on a particular street, search the street. If you need a pet friendly condo, ask. Whether you know exactly what you want or are just starting to figure it out, be specific with search terms like "new roof," "three-car garage," "established landscaping," "new kitchen appliances," etc. to find the property with the features you need.
Along with the well known national listing Web sites from trade groups, large private listing portals and real estate companies, the local multiple listing service's (MLS) public access portal are among the best places to search on line because they use standard formatting and strict guidelines about adding and removing listings in a timely manner.
• Screen home movies. A picture is worth a thousand words, but a video, a virtual open house, looks like a million bucks. Kodak moments can help you get a two-dimensional feel for a property, but virtual tours add a third dimension. Videos offer a much better sense of the proportions and the feel of a property. They can also play the starring role -- as a sort of 24-hour open house -- on a Web site or blog dedicated to the listing.
Here's another browsing for housing bonus: If you buy a home with its own Web site and virtual tour, you can ask the seller to gift the Web site or blog to you!
Published: March 18, 2010
Sam Zell: Recovery Is Underway
Sam Zell, the billionaire investor who made his fortune in real estate, told Bloomberg News yesterday that he expects the U.S. housing market to start recovering at the end of 2010 and strengthen in the middle of 2011.
Zell, who according to the Forbes’ tally is the 237th richest person in the world, said, “Conditions are getting better, but there’s a lot of uncertainty. The real question is: Can confidence return enough so that what you call the green shoots can continue forward?”
Zell said he expects more turmoil in the commercial real estate business, pointing toward General Growth Properties Inc., the mall owner that is fighting a takeover, as an example.
Source: Bloomberg, Rita Nazareth (03/16/2010)
Zell, who according to the Forbes’ tally is the 237th richest person in the world, said, “Conditions are getting better, but there’s a lot of uncertainty. The real question is: Can confidence return enough so that what you call the green shoots can continue forward?”
Zell said he expects more turmoil in the commercial real estate business, pointing toward General Growth Properties Inc., the mall owner that is fighting a takeover, as an example.
Source: Bloomberg, Rita Nazareth (03/16/2010)
Tips for Boomers: Benefits of Downsizing
For anyone approaching retirement, now could be a great time to move.
Here are some tips for Boomers considering downsizing:
*Don’t miss out on the $6,500 move-up tax credit. *Consider a short-distance move if it provides savings and convenience. *Anyone moving out of state should figure the tax consequences in their new location. *Consider a property that offers features allowing Boomers to age gracefully. *Think about sharing space with a younger (or older) family member. *Insist on good security in the new property. *Look for homes that don’t require a lot of maintenance. *Go green. It will pay off down the road.
Source: Forbes, Ashlea Ebeling (03/16/2010)
Fed To Stop Buying MBS The Federal Reserve renewed its commitment to keep key interest rates near zero for an “extended period,” but also confirmed that it will stop buying mortgage-backed securities at the end of March.
The Fed, whose regular meeting began Tuesday, said that “housing starts have been flat at depressed levels” and “employers remain reluctant to add to payrolls” as a reason for extending the cap on interest rates.
“The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability,” the Federal Open Market Committee statement said.
Source: Bloomberg, Craig Torres and Scott Lanman (03/16/2010)
Find Your Path HomeCENTURY 21: The Gold Standard
Find Your Path HomeCENTURY 21: The Gold StandardDRE License Number(s): 00656946 Find Your Path HomeEmail Us Visit Our WebSite
Here are some tips for Boomers considering downsizing:
*Don’t miss out on the $6,500 move-up tax credit. *Consider a short-distance move if it provides savings and convenience. *Anyone moving out of state should figure the tax consequences in their new location. *Consider a property that offers features allowing Boomers to age gracefully. *Think about sharing space with a younger (or older) family member. *Insist on good security in the new property. *Look for homes that don’t require a lot of maintenance. *Go green. It will pay off down the road.
Source: Forbes, Ashlea Ebeling (03/16/2010)
Fed To Stop Buying MBS The Federal Reserve renewed its commitment to keep key interest rates near zero for an “extended period,” but also confirmed that it will stop buying mortgage-backed securities at the end of March.
The Fed, whose regular meeting began Tuesday, said that “housing starts have been flat at depressed levels” and “employers remain reluctant to add to payrolls” as a reason for extending the cap on interest rates.
“The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability,” the Federal Open Market Committee statement said.
Source: Bloomberg, Craig Torres and Scott Lanman (03/16/2010)
Find Your Path HomeCENTURY 21: The Gold Standard
Find Your Path HomeCENTURY 21: The Gold StandardDRE License Number(s): 00656946 Find Your Path HomeEmail Us Visit Our WebSite
Real Estate Outlook: Positive Signs of Recovery
Positive signs on employment and national economic growth should start being felt in the housing market in the coming several months, say top economists.
The Labor Department reports that there were 2.7 million job openings last month -- 200,000 more than in the same survey the month before.
Meanwhile, the consensus forecast among private and government economists for the main barometer of the U.S. economy's health, gross domestic product or GDP, is for a very solid 3 percent during the first quarter.
Alan Levenson, chief economist for T.Rowe Price Associates, said the latest reports are “indicative of a labor market and economy that is in the midst of recovery.”
That's hugely important for real estate because expanding employment created by a rowing national economy are the essential fuels to power housing demand and sales.
Even though harsh weather conditions knocked the wind out of pending home sales and real estate shopping in many areas during January and February, analysts say the spring and summer market should be strong.
Lawrence Yun, chief economist for the National Association of Realtors, says the $8,000 and $6,500 federal home purchase tax credits that expire at the end of April for signed contracts -- and the end of June for closed deals -- should squeeze a lot of sales volume into the spring and early summer months.
Assuming slow but steady improvement in the jobs picture, Yun forecasts a solid second half of the year as well.
On the home pricing front, evidence continues to mount that in most parts of the country, home values have either bottomed out or have turned positive.
The most recent Case- Shiller index numbers on the top 20 metropolitan markets bear that out -- and last week's Zillow home value report found values essentially flat on a national average basis. They were down by just three tenths of a percent, but up in some major markets of note.
For example, Boston's home values are up nearly two percent year-over-year, according to Zillow, and Los Angeles, San Diego, Denver and Philadelphia have registered gains after long periods of negative numbers.
Two other statistical hints that conditions are improving: The difference between listed prices and selling prices of home nationwide is now smaller than it's been in a year, according to real estate research site Trulia.com.
And Realty Trac fond that foreclosures, which are clearly still a massive drag on the market -- dropped by two percent last month -- the second straight month of decline.
In a tough market, I guess we should appreciate even the smallest of improvements.
Published: March 15, 2010
The Labor Department reports that there were 2.7 million job openings last month -- 200,000 more than in the same survey the month before.
Meanwhile, the consensus forecast among private and government economists for the main barometer of the U.S. economy's health, gross domestic product or GDP, is for a very solid 3 percent during the first quarter.
Alan Levenson, chief economist for T.Rowe Price Associates, said the latest reports are “indicative of a labor market and economy that is in the midst of recovery.”
That's hugely important for real estate because expanding employment created by a rowing national economy are the essential fuels to power housing demand and sales.
Even though harsh weather conditions knocked the wind out of pending home sales and real estate shopping in many areas during January and February, analysts say the spring and summer market should be strong.
Lawrence Yun, chief economist for the National Association of Realtors, says the $8,000 and $6,500 federal home purchase tax credits that expire at the end of April for signed contracts -- and the end of June for closed deals -- should squeeze a lot of sales volume into the spring and early summer months.
Assuming slow but steady improvement in the jobs picture, Yun forecasts a solid second half of the year as well.
On the home pricing front, evidence continues to mount that in most parts of the country, home values have either bottomed out or have turned positive.
The most recent Case- Shiller index numbers on the top 20 metropolitan markets bear that out -- and last week's Zillow home value report found values essentially flat on a national average basis. They were down by just three tenths of a percent, but up in some major markets of note.
For example, Boston's home values are up nearly two percent year-over-year, according to Zillow, and Los Angeles, San Diego, Denver and Philadelphia have registered gains after long periods of negative numbers.
Two other statistical hints that conditions are improving: The difference between listed prices and selling prices of home nationwide is now smaller than it's been in a year, according to real estate research site Trulia.com.
And Realty Trac fond that foreclosures, which are clearly still a massive drag on the market -- dropped by two percent last month -- the second straight month of decline.
In a tough market, I guess we should appreciate even the smallest of improvements.
Published: March 15, 2010
Housing Experts Say Real Estate is Recovering
Some of the nation’s top economists believe the housing market has turned and better days are on the way for the housing industry.
Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.
“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.
“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.
Source: Bloomberg, Kathleen M. Howley and Rich Miller (03/15/2010)
Increases in jobs, credit, and affordable homes will overcome impediments such as rising interest rates, and the expiration of the Federal stimulus program to push the housing market toward recovery, says Dean Maki, chief U.S. economist for Barclays Capital.
“I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” says Karl Case, co-creator of the S&P/Case-Shiller Home Price Index and a professor of economics at Wellesley College.
“The underlying trend is turning positive,” says Bruce Kasman, chief economist at JPMorgan Chase & Co.
Source: Bloomberg, Kathleen M. Howley and Rich Miller (03/15/2010)
State law to save foreclosure victims from losing shirt on taxes
State legislation to protect people who lose their houses in foreclosure or short sales from a big tax bill passed a significant hurdle yesterday, when the Assembly gave its approval, shipping the proposal to the Senate for an expected vote on Thursday.
Passing the Assembly by a 47-27 vote, the bill authored by Sen. Lois Wolk (D-Davis) would exempt people who did short sales or received loan modifications or lost their houses in foreclosure last year from having to pay state tax on any mortgage debt that was forgiven. Otherwise the forgiven debt would be considered income for the homeowners even though they received no money from the sale of their home.
"As so many Californians are forced to walk away from their homes, their largest investment, the last thing they should have to think about is paying taxes on debt they couldn't repay," said Wolk an an e-mail.
Both the state and federal government extended a lifeline to homeowners in 2007 when the market was flooded with mortgage failures by temporarily exempting the tax on forgiven debt. However, while the federal exemption continues through 2012, the state's expired at the end of 2008.
With an April 15 tax deadline approaching, tax accountants say many of their clients are scared and uncertain how they would pay the added tax if the state does not pass legislation, which is designed to bring the state tax code in conformity with federal tax policy.
Brian Winter, a tax preparer at Jackson Hewitt in Riverside said a lot of his clients facing a big state tax bill because of the expiration of the state exemption don't have jobs or enough money to meet the obligation.
Noting that houses in Inland Southern California frequently are selling for hundreds of thousands of dollars less than the mortgages owed on them, Winter said he figures that some of his clients who have gone through foreclosures or short sales could see their state tax bills increase by $4,000 to $20,000.
Hewitt said a person with an annual income of $50,000 and $100,000 of debt cancelled on a house would be "on the hook" for about $8000 in additional income tax. He said most likely some of his clients would be forced into bankruptcy.
Many people who thought they were exempt from the debt forgiveness tax under both the state and federal law, Hewitt said, were shocked to receive 1099 forms in the mail from their lenders that need to be filed with their tax returns to report the cancelled debt.
As state law now stands not all homeowners who have a foreclosure, short sale or loan modification will take a state tax hit. According to the Senate Revenue and Taxation Committee, for example, debt forgiven on a first mortgage used to buy a house even now is not taxable. That is not true, however, if the original mortgage is refinanced and money taken out to buy a car or for another investment.
Hewitt said he understands that currently debt forgiven on refinancings done to raise money for home improvements or simply to get a lower monthly mortgage payment also are exempt from state tax. Also only a loan modification in which lower payments were accomplished by reducing the balance owed, not ones achieved by merely lowering an interest rate, are subject to state tax, he said.
Sandi Aplin, a tax accountant in Moreno Valley, said the tax laws pertaining to forgiven debt are very complex and require the attention of a professional tax preparer. She advised that those who have had mortgage debt forgiven should apply for extensions on filing their 2009 state tax returns to give the state government time to take action to help them.
Hewitt said he recommends that his clients hold off on preparing their state tax returns until the first week in April.
Prospects for the Wolk legislation are clouded by uncertainty whether Gov. Schwarzenegger will sign it. The governor vetoed similar federal conforming legislation in the past because of the attachment of a provision that would establish new tax penalties on individuals and businesses that file unfounded claims for tax refunds.
Craig Reynolds, Wolk's chief of staff, said a clause with the same purpose is included in the new legislation but the proposed penalties are narrowed to apply only to larger, sophistocated businesses and the super-wealthy who can afford tax advisors.
The governor has argued that the controversial clause should be taken out of the bill and considered in separate legislation, said Schwarzenegger Secretary Aaron McLear. --Leslie Berkman
Passing the Assembly by a 47-27 vote, the bill authored by Sen. Lois Wolk (D-Davis) would exempt people who did short sales or received loan modifications or lost their houses in foreclosure last year from having to pay state tax on any mortgage debt that was forgiven. Otherwise the forgiven debt would be considered income for the homeowners even though they received no money from the sale of their home.
"As so many Californians are forced to walk away from their homes, their largest investment, the last thing they should have to think about is paying taxes on debt they couldn't repay," said Wolk an an e-mail.
Both the state and federal government extended a lifeline to homeowners in 2007 when the market was flooded with mortgage failures by temporarily exempting the tax on forgiven debt. However, while the federal exemption continues through 2012, the state's expired at the end of 2008.
With an April 15 tax deadline approaching, tax accountants say many of their clients are scared and uncertain how they would pay the added tax if the state does not pass legislation, which is designed to bring the state tax code in conformity with federal tax policy.
Brian Winter, a tax preparer at Jackson Hewitt in Riverside said a lot of his clients facing a big state tax bill because of the expiration of the state exemption don't have jobs or enough money to meet the obligation.
Noting that houses in Inland Southern California frequently are selling for hundreds of thousands of dollars less than the mortgages owed on them, Winter said he figures that some of his clients who have gone through foreclosures or short sales could see their state tax bills increase by $4,000 to $20,000.
Hewitt said a person with an annual income of $50,000 and $100,000 of debt cancelled on a house would be "on the hook" for about $8000 in additional income tax. He said most likely some of his clients would be forced into bankruptcy.
Many people who thought they were exempt from the debt forgiveness tax under both the state and federal law, Hewitt said, were shocked to receive 1099 forms in the mail from their lenders that need to be filed with their tax returns to report the cancelled debt.
As state law now stands not all homeowners who have a foreclosure, short sale or loan modification will take a state tax hit. According to the Senate Revenue and Taxation Committee, for example, debt forgiven on a first mortgage used to buy a house even now is not taxable. That is not true, however, if the original mortgage is refinanced and money taken out to buy a car or for another investment.
Hewitt said he understands that currently debt forgiven on refinancings done to raise money for home improvements or simply to get a lower monthly mortgage payment also are exempt from state tax. Also only a loan modification in which lower payments were accomplished by reducing the balance owed, not ones achieved by merely lowering an interest rate, are subject to state tax, he said.
Sandi Aplin, a tax accountant in Moreno Valley, said the tax laws pertaining to forgiven debt are very complex and require the attention of a professional tax preparer. She advised that those who have had mortgage debt forgiven should apply for extensions on filing their 2009 state tax returns to give the state government time to take action to help them.
Hewitt said he recommends that his clients hold off on preparing their state tax returns until the first week in April.
Prospects for the Wolk legislation are clouded by uncertainty whether Gov. Schwarzenegger will sign it. The governor vetoed similar federal conforming legislation in the past because of the attachment of a provision that would establish new tax penalties on individuals and businesses that file unfounded claims for tax refunds.
Craig Reynolds, Wolk's chief of staff, said a clause with the same purpose is included in the new legislation but the proposed penalties are narrowed to apply only to larger, sophistocated businesses and the super-wealthy who can afford tax advisors.
The governor has argued that the controversial clause should be taken out of the bill and considered in separate legislation, said Schwarzenegger Secretary Aaron McLear. --Leslie Berkman
Low Rates Help Make Home Buying More Affordable
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.97 percent with an average 0.7 point for the week ending March 4, 2010, down from last week when it averaged 5.05 percent. Last year at this time, the 30-year FRM averaged 5.15 percent.
The 15-year FRM this week averaged 4.33 percent with an average 0.7 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 4.72 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.11 percent this week, with an average 0.6 point, down from last week when it averaged 4.16 percent. A year ago, the 5-year ARM averaged 5.08 percent.
The 1-year Treasury-indexed ARM averaged 4.27 percent this week with an average 0.6 point, up from last week when it averaged 4.15 percent. At this time last year, the 1-year ARM averaged 4.86 percent.
"30-year fixed mortgages fell below 5 percent to match levels seen two weeks ago and are helping to maintain affordable home-purchase conditions," said Frank Nothaft, Freddie Mac vice president and chief economist. "In fact, monthly principal and interest mortgage payments for a typical family buying a median-priced home of $163,800 were just $709 in January, the lowest amount since February 1998, according to the National Association of Realtors® . For first-time homebuyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarter of 2009."
"The federal tax credit for homebuyers, which expires on April 30th, may make housing even more affordable for some families already in the middle of the home buying process. In fact, the Federal Reserve's March 3rd regional economic review noted that several districts attributed stronger home sales to the homebuyer tax credit."
Published: March 5, 2010
The 15-year FRM this week averaged 4.33 percent with an average 0.7 point, down from last week when it averaged 4.40 percent. A year ago at this time, the 15-year FRM averaged 4.72 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.11 percent this week, with an average 0.6 point, down from last week when it averaged 4.16 percent. A year ago, the 5-year ARM averaged 5.08 percent.
The 1-year Treasury-indexed ARM averaged 4.27 percent this week with an average 0.6 point, up from last week when it averaged 4.15 percent. At this time last year, the 1-year ARM averaged 4.86 percent.
"30-year fixed mortgages fell below 5 percent to match levels seen two weeks ago and are helping to maintain affordable home-purchase conditions," said Frank Nothaft, Freddie Mac vice president and chief economist. "In fact, monthly principal and interest mortgage payments for a typical family buying a median-priced home of $163,800 were just $709 in January, the lowest amount since February 1998, according to the National Association of Realtors® . For first-time homebuyers, the fourth quarter of 2009 was the third most affordable quarter since 1981 behind the first and second quarter of 2009."
"The federal tax credit for homebuyers, which expires on April 30th, may make housing even more affordable for some families already in the middle of the home buying process. In fact, the Federal Reserve's March 3rd regional economic review noted that several districts attributed stronger home sales to the homebuyer tax credit."
Published: March 5, 2010
Pre-Qualifying for a Mortgage
One of the first steps to take as a potential home buyer is to get pre-qualified for a loan. This step helps both you and your lender learn just how much home you can afford. And you should begin this process before you even start looking for a home.
According to the Federal Housing Administration (FHA), their pre-qualification essentials include:
Having a steady employment history, at least two years with the same employer.
Consistent or increasing income over the past two years.
Credit report should be in good standing with less than two thirty day late payments in the past two years.
Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
Any foreclosure must be at least three years old with good credit for the past three years.
Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
Other lenders' ideas regarding pre-qualification are all similar to those outlined above. A mortgage lender will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.
Why is this important? In recent years there has been a “mortgage crisis,” where the industry was rampant with fraud and with loans that put homeowners into situations they could not afford. As payments rose, homeowners found themselves unable to meet their monthly obligations. According to Realtytrac.com and their U.S. Foreclosure Market Report, in January 2010, one in every 409 households in the country had received a foreclosure filing.
Since pre-qualification for a home loan typically costs you nothing, but gives you both a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment, you can hardly wait to take this step.
What if the home you want is out of your reach? Experts recommend reducing your debt and saving up a larger amount for your down payment. Let's say your dream home is $225,000, but you only qualify for a $180,000 loan. If you have a downpayment of $45,000, then you are ready to make a move!
During the pre-qualification process, you will be expected to provide the following information:
your gross monthly income
your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)
The lender will be looking to see that your debt to income is below about 40 percent, and the lower the better. So, if you are looking to buy in the near future, be sure to talk to your lender soon!
According to the Federal Housing Administration (FHA), their pre-qualification essentials include:
Having a steady employment history, at least two years with the same employer.
Consistent or increasing income over the past two years.
Credit report should be in good standing with less than two thirty day late payments in the past two years.
Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
Any foreclosure must be at least three years old with good credit for the past three years.
Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.
Other lenders' ideas regarding pre-qualification are all similar to those outlined above. A mortgage lender will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.
Why is this important? In recent years there has been a “mortgage crisis,” where the industry was rampant with fraud and with loans that put homeowners into situations they could not afford. As payments rose, homeowners found themselves unable to meet their monthly obligations. According to Realtytrac.com and their U.S. Foreclosure Market Report, in January 2010, one in every 409 households in the country had received a foreclosure filing.
Since pre-qualification for a home loan typically costs you nothing, but gives you both a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment, you can hardly wait to take this step.
What if the home you want is out of your reach? Experts recommend reducing your debt and saving up a larger amount for your down payment. Let's say your dream home is $225,000, but you only qualify for a $180,000 loan. If you have a downpayment of $45,000, then you are ready to make a move!
During the pre-qualification process, you will be expected to provide the following information:
your gross monthly income
your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)
The lender will be looking to see that your debt to income is below about 40 percent, and the lower the better. So, if you are looking to buy in the near future, be sure to talk to your lender soon!
Real Estate Outlook: Federal Reserve Beige Book
If you're trying to figure out where real estate is headed in the coming months, should you listen to the Federal Reserve -- or do you focus on the latest pending home sales numbers?
Probably both, but here's a key fact: The Fed's latest "Beige Book" report -- based on economic data from each of its 12 regional member banks -- found positive signs in nine of the 12 regions it covered.
Despite blizzards and bad weather in January and early February in large portions of the country, the Fed's regional banks found consumer spending and manufacturing output increasing.
Both are key indicators of improving economic conditions ahead, especially consumer spending, which accounts for 70 percent of U.S. economic activity and directly affects employment growth.
In fact, according to a separate report issued by the Commerce Department last week, consumer spending increased by one half of one percent in January - outpacing income growth for the fourth straight month.
What does that signify? Consumers are slowly coming out of their shells, regaining confidence, and beginning to feel good again about buying more goods and services.
On the housing front, the National Association of Realtors reported last week that the severe weather that paralyzed entire sections of the country also put a damper on home shopping last month - knocking down pending home sales by 7.6 percent in the process.
Nonetheless, said Lawrence Yun, chief economist for the Realtors, pending home sales - signed contracts that have not yet gone to closing -- still came in 12 percent higher in January than they were the year before.
Plus, they are likely to bounce back strongly in the next couple of months as buyers rush to sign contracts to qualify for the expiring home purchase tax credits.
Even home prices nationally are showing hints of slow improvement. According to the latest Clear Capital price index, which is based on information from thousands of neighborhoods and Zip code-level reports, prices rose by 5 percent on average for the most recent quarter on a year-over-year basis.
Metropolitan Boston, which was one of the earliest markets to signal the price downturns following the boom, saw values up by nearly seven percent, year over year, according to Clear Capital' index.
All of this is being helped along by continuing favorable financing conditions in the mortgage markets. Applications for new mortgages to purchase houses in the coming several months were up by 12 percent last week, according to the Mortgage Bankers Association.
Thirty year fixed rate loans dipped to 4.9 percent, while 15 year fixed rate were flat at 4.3 percent.
Published: March 8, 2010
Probably both, but here's a key fact: The Fed's latest "Beige Book" report -- based on economic data from each of its 12 regional member banks -- found positive signs in nine of the 12 regions it covered.
Despite blizzards and bad weather in January and early February in large portions of the country, the Fed's regional banks found consumer spending and manufacturing output increasing.
Both are key indicators of improving economic conditions ahead, especially consumer spending, which accounts for 70 percent of U.S. economic activity and directly affects employment growth.
In fact, according to a separate report issued by the Commerce Department last week, consumer spending increased by one half of one percent in January - outpacing income growth for the fourth straight month.
What does that signify? Consumers are slowly coming out of their shells, regaining confidence, and beginning to feel good again about buying more goods and services.
On the housing front, the National Association of Realtors reported last week that the severe weather that paralyzed entire sections of the country also put a damper on home shopping last month - knocking down pending home sales by 7.6 percent in the process.
Nonetheless, said Lawrence Yun, chief economist for the Realtors, pending home sales - signed contracts that have not yet gone to closing -- still came in 12 percent higher in January than they were the year before.
Plus, they are likely to bounce back strongly in the next couple of months as buyers rush to sign contracts to qualify for the expiring home purchase tax credits.
Even home prices nationally are showing hints of slow improvement. According to the latest Clear Capital price index, which is based on information from thousands of neighborhoods and Zip code-level reports, prices rose by 5 percent on average for the most recent quarter on a year-over-year basis.
Metropolitan Boston, which was one of the earliest markets to signal the price downturns following the boom, saw values up by nearly seven percent, year over year, according to Clear Capital' index.
All of this is being helped along by continuing favorable financing conditions in the mortgage markets. Applications for new mortgages to purchase houses in the coming several months were up by 12 percent last week, according to the Mortgage Bankers Association.
Thirty year fixed rate loans dipped to 4.9 percent, while 15 year fixed rate were flat at 4.3 percent.
Published: March 8, 2010
Home Prices May Be Flat for Years (?????)
Housing prices are unlikely to fall much farther, but they aren’t going to rise either — at least for several years — predict analysts for Barclays Capital in its Residential Credit Strategy report.
Barclays blames government programs that have slowed foreclosures. “The overhang of distressed inventory is a huge negative technical. It suggests that any price rise will probably be met by increased distressed sales,” the report says.
The report also concludes that home prices are cheaper than rents and incomes suggest they should be, “but not extremely so.”
Source: Property Wire (03/03/2010)
Barclays blames government programs that have slowed foreclosures. “The overhang of distressed inventory is a huge negative technical. It suggests that any price rise will probably be met by increased distressed sales,” the report says.
The report also concludes that home prices are cheaper than rents and incomes suggest they should be, “but not extremely so.”
Source: Property Wire (03/03/2010)
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