Thursday, December 20, 2012

Why Your Mortgage Interest Deduction May G Off the Cliff

Congress Contemplates Making Changes To Major Homeowner Benefit

Happy Centennial to mortgage interest deduction!

Nearly 100 years ago, in 1913, Congress amended the Constitution to allow for the country’s first income tax — and agreed to make all interest payments deductible from this new obligation. A few decades later as the country began to emerge from the Great Depression and the Second World War, more and more Americans were buying homes and the tax deductibility of mortgage interest payments became a significant element of promoting home ownership.

Mortgage interest deduction costs $100 billion a year

As the “fiscal cliff” and huge budget deficit hang heavy on the minds and desks of policymakers in Washington, the mortgage interest deduction is thought to be close to the top of the list of possible solutions to reducing the deficit. The mortgage deduction is both “one of the most cherished in the U.S. tax code… and on eof the most expensive, estimated to cost the federal government $100 billion this fiscal year.” (Los Angeles Times)

Likely to be “adjusted” but not “eliminated”

Experts agree that it is unlikely that a wholesale elimination of the mortgage interest deduction will be approved. It is more likely that the code will be refined to reduce the benefit for high-income households and borrowers. The president of the National Association of Realtors (NAR), Gary Thomas, commented that it has always been the N.A.R.’s position that the mortgage interest deduction is vital to the stability of the American housing market and economy, and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.” (The New York Times)

Changing the deduction has bi-partisan support

In a time when there seems to be little upon which Democrats and Republicans can agree, changing the mortgage interest tax deduction seems to be striking the right bi-partisan note. Both President Obama and the former Republican presidential nominee, Mitt Romney, have come out in support of capping the deduction.

Via The American Prospect, The Los Angeles Times, The New York Times.

Friday, December 14, 2012

House Prices: Where Are They Headed This Winter?

 In a blog post last month, we projected that home values might actually begin to soften on a month-over-month basis throughout the winter. There are other expert analysts that are also notifying their readership of this possibility. Calculated Risk, in a post last week explained:

“The monthly Case-Shiller house price indexes will show month-to-month declines soon, probably starting with the October report to be released in late December. The CoreLogic Index has already started to decline on a month-to-month basis.” 
Fiserv, another company that analyzes home prices, came to the same conclusion:
“We project a small, short-term price decline for many markets that recently experienced double-digit appreciation.”
 This may seem counter to the headlines you have seen claiming home prices are on the rise. However, we must realize that there is seasonality to home price movements. Over the last few years, prices have increased in the spring through the early fall. They then soften throughout the winter. As Calculated Risk reveals:
“This is not a sign of impending doom - or another collapse in house prices – it is just the normal seasonal pattern.”
If you are thinking of selling your home in the next 6-8 months, you should realize that waiting may not ensure a higher price and perhaps may even result in a slightly lower sales price.

Attention Real Estate Professionals:

The webinar we are doing this Wednesday will include a powerful visual presentation on why prices will soften this winter. Reserve a seat by clicking here

 House Prices: Where Are They Headed This Winter?

Wednesday, December 12, 2012

Short Sales are on the rise

According to recent study by the online marketing company, RealtyTrac, short sales have been on the rise.
These homeowners are motivated to sell in a short sale because the closing price is less than what they owe the bank. The bank agrees to absorb the loss, and unloads the property while the homeowner gets out of a mortgage they can't afford.
Currently, homeowners don't have to pay federal tax on the unpaid mortgage debt because of a bailout-era law known as the Federal Mortgage Debt Forgiveness Act.
However, this act expires on December 31 and unless it is extended, in January the IRS will start treating unpaid mortgage debt as taxable income for many borrowers. The average amount of forgiven debt in a short sale is about $95,000, according to Blomquist. The tax on that amount could go as high as $33,250, even more if the Bush tax cuts expire.

Friday, December 7, 2012

Harmful Effects from Changing the Listing Price?


With the housing market showing signs of a recovery, sellers may think they can list their homes at a higher price and adjust if necessary. That may not be a good strategy. This is a post we ran last year by Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research. To view other research from FIU, visit - The KCM Crew

 The Research
Are there any negative effects from changing the listing price of a property?  This question haunts Brokers/Agents as well as sellers of property every day.  At present, there does not seem to be a consensus answer to this question within the professional real estate community.  Fortunately, this question was scientifically investigated by John R. Knight. Unfortunately, few know the results of Professor Knight’s research.
In Knight, the impact of changing a property’s listing price is investigated.  Additionally, the types of property that are most likely to experience a price change are also estimated.  The findings from this research indicate that, on average, properties which experience a listing price change take longer to sell and suffer a price discount greater than similar properties.  Furthermore, bigger price changes are found to experience even longer marketing times and greater price discounts.  Finally, as for which properties are most likely to experience a price change, Knight finds that the greater the initial markup; the higher the likelihood that any given property will experience a listing price change.

You can finish reading this article at the link posted.  Harmful Effects from Changing the Listing Price.