Real Estate: Like a Phoenix Rising From the Ashes

Article By:  The KCM Crew on February 15, 2011

Courtesy of Keeping Current Matters

The real estate market has experienced difficulty over the last five years. From 2000-2006, house values climbed to unsustainable heights. Since then, we have seen much of this appreciation disappear. Now many look at the housing market as dead and lying in the ashes of its previous glory. However, there is growing evidence that, just like the Phoenix, there is a new market currently rising from those ashes.

Buyer activity is increasing

The first sign of an improving market is buyers again beginning to shop for a home for themselves and their family. That is taking place right now.

 Pete Flint, CEO of Trulia said in a recent press release:

“We’re seeing a national resurgence of buyer and seller activity on Trulia.com. In January alone, we experienced an unprecedented level of site traffic including 11 million unique visitors – which is more than 70 percent year-over-year growth… (We) are now experiencing 100,000 property views per minute.” 

The latest Credit Suisse Monthly Survey of Real Estate Agents reports:

Our Monthly Survey of Real Estate Agents pointed to another month of improved traffic – the third straight month, and the highest level for our traffic index since April 2010, the last month of the homebuyer tax credit. The improved economy and stronger consumer confidence has translated into an increase in homebuyer traffic.

But have they actually started purchasing?

The best news is that buyers are not just looking. The latest National Association of Realtors’ (NAR) Pending Sales Report, which quantifies the number of homes going into contract, shows continued improvement:

Pending home sales improved further in December, marking the fifth gain in the past six months.

Bottom Line

Buyers are back out looking at homes and the number that are actually purchasing is steadily increasing. It appears the housing market is on the verge of a rebirth. The Phoenix is beginning to flap its wings.

30-Year Rates Back Below 5%

Courtesy of RealtorMag.org
Daily Real Estate News - February 25, 2011

Mortgage rates were on the decline this week, a welcome sign for potential home buyers or those looking to refinance.

The 30-year fixed rate mortgage averaged 4.95 percent this week, down from 5 percent the week prior, according to Freddie Mac’s weekly mortgage market survey. Last year at this time, 30-year rates averaged 5.05 percent.

The 15-year, fixed-rate mortgage also dropped for the week, averaging 4.22 percent, down from last week’s 4.27 percent. The 5-year adjustable-rate mortgage dropped slightly to 3.8 percent, compared to 3.87 percent the previous week.

“Low mortgage rates and home prices are sustaining affordability in the housing market,” says Frank Nothaft, Freddie Mac’s chief economist. The National Association of REALTORS® reported earlier this week that existing home sales rose for the third consecutive month in January and were at the strongest pace in eight months.

Source: “30-Year Fixed-Rate Mortgage Eases Just Below 5 Percent,” Freddie Mac (Feb. 24, 2011)

Cactus League Baseball Begins!

Here's a link to Cactus League Baseball in the Valley of the Sun.  You can find the same link at my website, along with links to other events in the Valley.

Happy Birthday, Arizona!

Arizona celebrates 99 years of statehood today! 

Here's a link to a beautiful video slide show I found on the internet created by someone called "doninarabia" that goes with the Arizona State song "I Love You Arizona" by Rex Allen Jr.  In the years when I taught first grade, I always had my students illustrate a blank map of Arizona as we listened to this beautiful song.  Their drawings were always amazing and captured the essence of Arizona from the viewpoint of a child.

The Cost of Waiting for Prices to Fall

Article By:  The KCM Crew on February 11, 2011
Courtesy of Keeping Current Matters

Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, we also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices. They should be concerned about cost.  The cost of a house is made up of the price AND THE INTEREST RATE they will be paying. Two different pieces of news released yesterday highlight this point.

 

PRICES

The National Association of Realtors (NAR) released their 4^th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year:

The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009.

A buyer who delayed a purchase might find solace in the fact that prices have not increased. However, the other news released yesterday paints a different picture.

 

INTEREST RATES

The Primary Mortgage Market Survey was released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said:

“Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week…As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.”

So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a home this year?  The price is the same. It just costs more.

Let’s show you what the news means:

By sitting on the sidelines for the last 90 days a purchaser lost:

• $89.44 a month
• $1,073.28 a year
• $32,198.40 over the thirty year life of the mortgage

If you buy a $340,000 home, double all these numbers.

 

Bottom Line

Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. Buyers should not worry where prices are going. They should be concerned where costs will be later in the year.

10 Common Errors Home Owners Make When Filing Taxes

Courtesy of the National Association of REALTORS®  (House Logic)
Article By: G. M. Filisko
Published: January 25, 2011

Don’t rouse the IRS or pay more taxes than necessary—know the score on each home tax deduction and credit.

Sin #1: Deducting the wrong year for property taxes

You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind—that is, you’re not billed for 2010 property taxes until 2011. But that’s irrelevant to the feds.

Enter on your federal forms whatever amount you actually paid in 2010, no matter what the date is on your tax bill. Dave Hampton, CPA, tax manager at the Cincinnati accounting firm of Burke & Schindler, has seen home owners confuse payments for different years and claim the incorrect amount.

Sin #2: Confusing escrow amount for actual taxes paid

If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed, says Bob Meighan, CPA and vice president at TurboTax in San Diego. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.

For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200. Your lender will send you an official statement listing the actual taxes paid. Use that. Don’t just add up 12 months of escrow property tax payments.

Sin #3: Deducting points paid to refinance

Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, says Meighan, you must deduct points over the life of your new loan. If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.

Sin #4: Failing to deduct private mortgage insurance

Lenders require home buyers with a downpayment of less than 20% to purchase private mortgage insurance (PMI). Avoid the common mistake of forgetting to deduct your PMI payments. However, note the deduction begins to phase out once your adjusted gross income reaches $100,000 and disappears entirely when your AGI surpasses $109,000.

Sin #5: Misjudging the home office tax deduction

This deduction may not be as good as it seems. It often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return. Hampton’s advice: Claim it only if it’s worth those drawbacks.

Sin #6: Missing the first-time home buyer tax credit

If you met the midyear 2010 deadlines, don’t forget to take this tax credit into account when filing.

Even if you missed the 2010 deadlines, you still might be in luck: Congress extended the first-time home buyer credit for military families and other government workers on assignment outside the United States. If you meet the criteria, you have until June 30, 2011, to close on your first home and qualify for the tax credit of up to $8,000.

Sin #7: Failing to track home-related expenses

If the IRS comes a-knockin’, don’t be scrambling to compile your records. Many people forget to track home office and home maintenance and repair expenses, says Meighan. File away documents as you go. For example, save each manufacturer's certification statement for energy tax credits, insurance company statements for PMI, and lender or government statements to confirm property taxes paid.

Sin #8: Forgetting to keep track of capital gains

If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. However, you can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes. So if you bought a home for $100,000 and sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains. However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523.  

Sin #9: Filing incorrectly for energy tax credits

If you made any eligible improvement, fill out Form 5695. Part I, which covers the 30%/$1,500 credit for such items as insulation and windows, is fairly straightforward. But Part II, which covers the 30%/no-limit items such as geothermal heat pumps, can be incredibly complex and involves crosschecking with half a dozen other IRS forms. Read the instructions carefully.

Sin #10: Claiming too much for the mortgage interest tax deduction

You can deduct mortgage interest only up to $1 million of mortgage debt, says Meighan. If you have $1.2 million in mortgage debt, for example, deduct only the mortgage interest attributable to the first $1 million.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

G.M. Filisko is an attorney and award-winning writer who was once mortified to receive a letter from the IRS—but relieved to learn the IRS had simply found a math error in her favor. A frequent contributor to many national publications including AARP.org, Bankrate.com, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

False Information Circulating on the Internet

I generally do not include attachments to my email version of Pook's E-News, however, I did that today because two different emails are currently circulating that contain false information for homeowners. One is regarding legislation in the Senate that would require an energy license or retrofit for home sales and the other talks about the health care bill which supposedly contains a 4.0 percent “transfer tax” on homes sales.  Email me if you would like to receive the MYTH BUSTERS document which comes from the National Association of REALTORS®. Please take the time to read it and share it with others.