LOS ANGELES (Oct. 25) – Home sales decreased 31.7 percent in September in California compared with the same period a year ago, while the median price of an existing home increased 1.8 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“We expected a fairly steep decline in sales last month compared with a year ago, when sales were near their all-time record,” said C.A.R. President Vince Malta. “Unsold inventory is holding steady, and is close to the long-term historic average typical of a more ‘normal’ market.”
Click hear to read more http://www.car.org/index.php?id=MzY3MjQ=
Friday, October 27, 2006
Friday, October 20, 2006
Association of Realtors Expects Cooling Home Sales, Modest Price Decrease Next Year
From the California Association of Realtors newsletter:
The rate of home price appreciation will post a modest decline next year following several years of steep increases, while the sales pace will decrease as the market stabilizes throughout 2007, according to C.A.R.'s "2007 California Housing Market Forecast," presented today during the California REALTOR® EXPO 2006, running from Oct. 17--19 at the Long Beach Convention Center. The median home price in California will decline 2 percent to $550,000 in 2007 compared with a projected median of $561,000 this year, while sales for 2007 are projected to decrease 7 percent to 447,500 units, compared with 481,200 units (projected) in 2006.
"Although the 2007 sales decline is not expected to be as steep as what we experienced this year, the psychology of the market -- matching the differing expectations of sellers and buyers -- will continue to be a factor as REALTORS® help consumers navigate their way through a changing market," said C.A.R. President Vince Malta. "While we're projecting a modest decline in the median price of a home, over the long term, residential real estate in California has been and will continue to be a solid investment. Since 1968, the long-term average price appreciation is 9.1 percent."
"While we recognized that the frenetic sales pace of the past four years could not continue indefinitely, the housing market in 2006 did not fare as well as we initially expected," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The anticipated slowdown that began in October 2005 was heightened by dual natural disasters in the Gulf Coast, a significant drop in consumer confidence, rising energy and raw materials costs, and a series of Federal Reserve interest rate hikes that began in June 2004. Fixed-rate mortgages also hit and passed the psychological threshold of 6 percent, while adjustable-rate mortgages passed 5 percent, ultimately causing a decline in affordability. Affordability concerns also will continue to constrain sales for many households in California throughout 2007, especially for first-time home buyers."
Thursday, October 19, 2006
A Tax Law Change You Should Know About!
From the California Association of Realtors News Letter:
“Tax alternative to 3.33 percent California withholding: Effective Jan. 1, 2007, sellers required to have 3.33 percent of the sales price withheld for income tax purposes may elect an alternative withholding. The alternative withholding is an estimate of the seller's tax liability calculated by multiplying the recognized capital gain by the highest state tax rate for individual taxpayers (or the corporate tax rate for corporations), regardless of the taxpayer's actual tax bracket. Under existing California law, a buyer must withhold 3.33 percent of the sales price from the seller's proceeds unless an exemption applies, such as when the property is the seller's principal residence, the property is in a 1031 exchange, or the seller will not realize any capital gains. The new law applies to non-exempt sellers who may now elect to have less than 3.33 percent withheld. A seller opting for this tax alternative withholding must certify the amount to be withheld in writing under penalty of perjury.”
Wednesday, October 18, 2006
Halloween Safety
We hope you and your family will have a safe and fun Halloween. With that in mind we've put together this list of websites where you can find great safety tips.
- National Safety Council http://www.nsc.org/library/facts/halloween.htm
- Academy of Pediatrics http://www.aap.org/advocacy/releases/octhalloween.htm
- Red Cross http://www.redcross.org/services/hss/tips/october/octtips.html
- Children's Safety Zone http://www.sosnet.com/safety/halloween.tip.html
Have a happy and safe holiday!
Friday, October 13, 2006
Protecting Your Credit During Divorce
By Shanne Sleder (The loan dude)
When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.
Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.
The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.
The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)
Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).
Now that you have this information at your fingertips, it’s time to make a plan.
There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common securedaccounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.
When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.
In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.
When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.
If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.
Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.
Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.
When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.
The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.
The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)
Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).
Now that you have this information at your fingertips, it’s time to make a plan.
There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common securedaccounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.
When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.
In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.
When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.
If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.
Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.
Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.
Thursday, October 12, 2006
Landlords look out! 60-day notice to terminate revived
Flash! A news release from the California Association of Realtor.
Beginning Jan. 1, 2007, a residential landlord must generally give a 60-day notice to terminate a month-to-month tenant. However, a 30-day notice to terminate is permissible if any tenant or resident has lived in the property for less than one year, or if the landlord has sold the property in the manner specified by law. The 60-day notice does not apply to fixed-term leases (e.g., a one-year lease). It also does not apply if it is the tenant, not the landlord, who terminates a month-to-month agreement, in which case the tenant may give a 30-day notice. To comport with this new law, the California Association of Realtors will release a new standard form "60-day notice of termination", which will also set forth the requirements for the 30-day exception when landlords sell their properties. This law will sunset on Dec. 31, 2009.
Beginning Jan. 1, 2007, a residential landlord must generally give a 60-day notice to terminate a month-to-month tenant. However, a 30-day notice to terminate is permissible if any tenant or resident has lived in the property for less than one year, or if the landlord has sold the property in the manner specified by law. The 60-day notice does not apply to fixed-term leases (e.g., a one-year lease). It also does not apply if it is the tenant, not the landlord, who terminates a month-to-month agreement, in which case the tenant may give a 30-day notice. To comport with this new law, the California Association of Realtors will release a new standard form "60-day notice of termination", which will also set forth the requirements for the 30-day exception when landlords sell their properties. This law will sunset on Dec. 31, 2009.
Mortgage Applications Decrease in Latest Survey
WASHINGTON, D.C. (October 11, 2006) - The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 6. The Market Composite Index, a measure of mortgage loan application volume, was 599.1, a decrease of 5.5 percent on a seasonally adjusted basis from 633.9 one week earlier. On an unadjusted basis, the Index decreased 5.3 percent compared with the previous week and was down 13.3 percent compared with the same week one year earlier.
To read the entire story, click on the headline above...
National Foreclosures Remain Elevated in September
IRVINE, Calif. – Oct. 11, 2006 – RealtyTrac™ (http://www.realtytrac.com/), the leading online marketplace for foreclosure properties, today released its September 2006 U.S. Foreclosure Market Report, which shows 112,210 properties nationwide entered some stage of foreclosure during the month, a decrease of less than 1 percent from August, and a 63 percent increase from September 2005. The report also shows a national foreclosure rate of one new foreclosure filing for every 1,030 U.S. households, the third highest monthly foreclosure rate reported this year.
To read more click on the headline above...
Monday, October 09, 2006
The Real Estate Time Machine
By your real estate dude
Time has always fascinated me. One of my favorite movies when I was a kid was H.G. Wells “Time Machine”. If you’re old enough to remember it, you probably liked it too. It was full of adventure and, besides, there was just something cool about the idea of controlling time. Ah, the freedom I would have if I only had the chance to move through time and control the events that so often seem to have control over me. I think it’s a safe bet that most people feel that way. If we didn’t, there wouldn’t be so many movies about controlling time.
As you grow older, the reasons for wanting to control time change. When I was a kid, I wanted to slow time down so I could have more of it in which to get my homework done or speed it up so the school day would go by quicker. As an adult, I have dreamed of more time with my wife and kids and that sort of thing. But mostly, my desire to take a crack at the old time machine has applied to my business life where investments are concerned, which brings me to the subject of time where it applies to real estate.
In real estate, as in most other kinds of investing, time takes on new meaning and can be broken down into two basic parts: time and timing. Timing is easy to imagine. It’s simply a matter of being in the right place at the right time and taking the correct action in order to bring about the desired result. Like I said, it’s easy to imagine. Unfortunately, it’s a lot easier to imagine than it is to do, which explains why I’ve always wanted a time machine! Time, on the other hand, can be defined as how long you hold a property or other investment between the date on which you purchase it and the date on which you sell it, at least for the purpose of this discussion. So then, as my wife would say, timing is the “when” and time is the “how long”.
I had a client recently who bought a house when homes were selling faster than you could put the “For Sale” signs up. She, like many others, figured that prices would just keep climbing. A year or so later she wanted to sell, but by then, the market had softened and she couldn’t sell it for what she owed on it. You might say that she had been hoodwinked by “time & timing” simply because she didn’t quite understand how they worked.
Another client also purchased a home at a time when prices were high. He and his wife had just come to town and needed a place to live, so they bought a home even though prices were high and the timing was not the greatest. I just sold their home a couple of months ago. The current market had softened, but they still walked away with a serious profit on the sale of that house. Both these folks bought a house when prices were high. In both cases, the “timing” of the purchase was poor. The only difference was “time”. While one owner had lived in the home for a little over a year, the other had lived there well over a decade. “Well obviously,” you say. But there is a lesson in this. The hard fact is that “timing” leaves little room for error, but “time” is much more forgiving. Let’s explore why this is the case with real estate.
Taking a look at the pricing trends of real estate in San Diego County over the past 100 years, we find that prices have consistently increased over time. Certainly, the market has taken some dips along the way, even some serious ones. However, on balance, it can be said that if you had purchased property anywhere along that one hundred year track and held it long enough, its value would have increased significantly. Depending upon when you purchased the property, you might have had to hold it only a year or two to get the appreciation you desired. On the other hand, you might have purchased it at a time in that hundred year span which required you to hold the property for a period of five, seven or even ten years to see the appreciation. But, either way, if you held it long enough the value when up!
The moral of the story is this: when you’re investing your hard earned money in a home or rental property, it’s important to understand that in general, real estate investments perform best over the long term. So, take this tip from a fellow time traveler and remember the old adage: “He who has the time wins”. Set yourself up for the long haul just in case something unforeseen comes your way. That way, even if you plan to sell the property in the short term to make a quick buck, you’ll be prepared to hold it for the long term if the market changes and you won’t get stuck.
Time has always fascinated me. One of my favorite movies when I was a kid was H.G. Wells “Time Machine”. If you’re old enough to remember it, you probably liked it too. It was full of adventure and, besides, there was just something cool about the idea of controlling time. Ah, the freedom I would have if I only had the chance to move through time and control the events that so often seem to have control over me. I think it’s a safe bet that most people feel that way. If we didn’t, there wouldn’t be so many movies about controlling time.As you grow older, the reasons for wanting to control time change. When I was a kid, I wanted to slow time down so I could have more of it in which to get my homework done or speed it up so the school day would go by quicker. As an adult, I have dreamed of more time with my wife and kids and that sort of thing. But mostly, my desire to take a crack at the old time machine has applied to my business life where investments are concerned, which brings me to the subject of time where it applies to real estate.
In real estate, as in most other kinds of investing, time takes on new meaning and can be broken down into two basic parts: time and timing. Timing is easy to imagine. It’s simply a matter of being in the right place at the right time and taking the correct action in order to bring about the desired result. Like I said, it’s easy to imagine. Unfortunately, it’s a lot easier to imagine than it is to do, which explains why I’ve always wanted a time machine! Time, on the other hand, can be defined as how long you hold a property or other investment between the date on which you purchase it and the date on which you sell it, at least for the purpose of this discussion. So then, as my wife would say, timing is the “when” and time is the “how long”.
I had a client recently who bought a house when homes were selling faster than you could put the “For Sale” signs up. She, like many others, figured that prices would just keep climbing. A year or so later she wanted to sell, but by then, the market had softened and she couldn’t sell it for what she owed on it. You might say that she had been hoodwinked by “time & timing” simply because she didn’t quite understand how they worked.
Another client also purchased a home at a time when prices were high. He and his wife had just come to town and needed a place to live, so they bought a home even though prices were high and the timing was not the greatest. I just sold their home a couple of months ago. The current market had softened, but they still walked away with a serious profit on the sale of that house. Both these folks bought a house when prices were high. In both cases, the “timing” of the purchase was poor. The only difference was “time”. While one owner had lived in the home for a little over a year, the other had lived there well over a decade. “Well obviously,” you say. But there is a lesson in this. The hard fact is that “timing” leaves little room for error, but “time” is much more forgiving. Let’s explore why this is the case with real estate.
Taking a look at the pricing trends of real estate in San Diego County over the past 100 years, we find that prices have consistently increased over time. Certainly, the market has taken some dips along the way, even some serious ones. However, on balance, it can be said that if you had purchased property anywhere along that one hundred year track and held it long enough, its value would have increased significantly. Depending upon when you purchased the property, you might have had to hold it only a year or two to get the appreciation you desired. On the other hand, you might have purchased it at a time in that hundred year span which required you to hold the property for a period of five, seven or even ten years to see the appreciation. But, either way, if you held it long enough the value when up!
The moral of the story is this: when you’re investing your hard earned money in a home or rental property, it’s important to understand that in general, real estate investments perform best over the long term. So, take this tip from a fellow time traveler and remember the old adage: “He who has the time wins”. Set yourself up for the long haul just in case something unforeseen comes your way. That way, even if you plan to sell the property in the short term to make a quick buck, you’ll be prepared to hold it for the long term if the market changes and you won’t get stuck.
Friday, October 06, 2006
Mission Federal Sponsors FREE "dude" seminar for home buyers!
The next FREE “dude” seminar “7 Steps to successfully buying a home” will help home buyers achieve their goals in this changing market.
You’ll learn what’s involved in:
- Deciding to buy
- Choosing a realtor
- Finding an area
- Identifying prospective homes
- Analyzing the purchase
- Making an offer & putting the deal together
- And managing the close
The seminar is sponsored by Mission Federal Credit Union.
Date: October 21, 2006
Time: 9:00am - 11:30am
Location:
Mission Federal Credit Union
5785 Oberlin Drive
San Diego, Ca 92121
(800) 500-6328
We'll have Coffee and stuff to munch on.
Remember, it’s FREE.
RSVP by clicking on “Ask the dude experts”.
See you there!
Tuesday, October 03, 2006
East County Newspaper Signs Your Real Estate Dude To Write Weekly Column!
FLASH! STOP THE PRESSES! EXTRA, EXTRA, READ ALL ABOUT IT!
This week, the East County Californian, a leading newspaper in San Diego’s beautiful East County has agreed to publish a weekly real estate column by your real estate dude.
If you live in East County, please take a look at the column and tell us what you think!
Monday, October 02, 2006
Should I stay or should I go?
By your real estate dude
This may sound like an old song from The Clash, but it truly is a dilemma for many when it comes time to decide whether to sell or buy a home. It’s quite common for this simple question to lock people in the limbo world of analysis paralysis. This occurs when too much information, conflicting opinions and fear leave the person completely absorbed in the information but unable to make any sense of it all.
The other day I had a client look at me over the top of his newspaper as I walked up to meet him for coffee. He had the most exasperated look on his face as he announced, “Every time I read the paper, I’m more confused than I was when I started.” In his case the conundrum is whether to sell his home now or hold.
I was at a church event recently when a fellow I’ve known for many years asked the age old question “so, how’s the market?” This gentleman has been asking me if he should buy a house for years. I keep saying yes and he keeps putting it off and asking me the same thing at the next available opportunity. So, I took a couple of minutes to explain the current “buyer’s” market, the low interest rates, the reduction in prices and the deals that many sellers are willing to make in order to sell their homes. He looked at me as if I had ten heads and said, yet again what he always says, “I’m going to wait to see if prices come down.”
Almost without exception the struggle over “should I stay or should I go” revolves around home prices. Let’s face it, if you have a job transfer and have to move, the question is moot. Likewise, if your finances are in disarray and you must sell or are forced to wait until things improve in order to buy, the “should I” question never comes up.
After years of witnessing this struggle to understand what to do when prices change, I have come to the conclusion that it all stems from a misunderstanding of an old, but tried and true rule “buy low and sell high”. I first heard of this rule when I was a kid. My grandfather was quite the real estate investor and rattled this rule off to me on a number of occasions when I was a small boy. One day he asked me to repeat it. When I did he said, “Now remember, the rule is buy low and sell high. It’s not, buy lowest and sell highest”. This meant nothing to me at the time, but much later it was quite a revelation. I came to understand that if I bought when prices were low and sold when prices were high, I made money. It didn’t matter that I never seemed to catch the absolute bottom or top of the market. This may seem so simple as to be hardly worth mentioning, but I have witnessed many an enterprising individual lose money trying to hit the absolute high or low. Does this remind you of the fellow I mentioned earlier who is always waiting for the bottom of the market? If he had purchased a home the first time he asked me, “so, how’s the market”, the home he would have purchased would now be worth a fortune and he would be much better off.
Given the current “buyer’s market, if you are thinking about buying, the “buy low” rule is in full effect and now is the time. Prices are lower, interest rates are still low, lots of properties are for sale and sellers are willing to make deals. On the other hand, if selling is on your mind, it may not be the best time unless you purchased the property some years ago and have significant equity. In that case, you bought low and even though the market has softened you can still sell high because of time. If the equity isn’t there, my advice is hold off for a while. Time will tell, but the chance to sell high may come your way sooner than you think.
This may sound like an old song from The Clash, but it truly is a dilemma for many when it comes time to decide whether to sell or buy a home. It’s quite common for this simple question to lock people in the limbo world of analysis paralysis. This occurs when too much information, conflicting opinions and fear leave the person completely absorbed in the information but unable to make any sense of it all.The other day I had a client look at me over the top of his newspaper as I walked up to meet him for coffee. He had the most exasperated look on his face as he announced, “Every time I read the paper, I’m more confused than I was when I started.” In his case the conundrum is whether to sell his home now or hold.
I was at a church event recently when a fellow I’ve known for many years asked the age old question “so, how’s the market?” This gentleman has been asking me if he should buy a house for years. I keep saying yes and he keeps putting it off and asking me the same thing at the next available opportunity. So, I took a couple of minutes to explain the current “buyer’s” market, the low interest rates, the reduction in prices and the deals that many sellers are willing to make in order to sell their homes. He looked at me as if I had ten heads and said, yet again what he always says, “I’m going to wait to see if prices come down.”
Almost without exception the struggle over “should I stay or should I go” revolves around home prices. Let’s face it, if you have a job transfer and have to move, the question is moot. Likewise, if your finances are in disarray and you must sell or are forced to wait until things improve in order to buy, the “should I” question never comes up.
After years of witnessing this struggle to understand what to do when prices change, I have come to the conclusion that it all stems from a misunderstanding of an old, but tried and true rule “buy low and sell high”. I first heard of this rule when I was a kid. My grandfather was quite the real estate investor and rattled this rule off to me on a number of occasions when I was a small boy. One day he asked me to repeat it. When I did he said, “Now remember, the rule is buy low and sell high. It’s not, buy lowest and sell highest”. This meant nothing to me at the time, but much later it was quite a revelation. I came to understand that if I bought when prices were low and sold when prices were high, I made money. It didn’t matter that I never seemed to catch the absolute bottom or top of the market. This may seem so simple as to be hardly worth mentioning, but I have witnessed many an enterprising individual lose money trying to hit the absolute high or low. Does this remind you of the fellow I mentioned earlier who is always waiting for the bottom of the market? If he had purchased a home the first time he asked me, “so, how’s the market”, the home he would have purchased would now be worth a fortune and he would be much better off.
Given the current “buyer’s market, if you are thinking about buying, the “buy low” rule is in full effect and now is the time. Prices are lower, interest rates are still low, lots of properties are for sale and sellers are willing to make deals. On the other hand, if selling is on your mind, it may not be the best time unless you purchased the property some years ago and have significant equity. In that case, you bought low and even though the market has softened you can still sell high because of time. If the equity isn’t there, my advice is hold off for a while. Time will tell, but the chance to sell high may come your way sooner than you think.
Thursday, September 28, 2006
Chicken Little Is Crying Again
By your real estate dude
Today's San Diego Union article by Dean Calbreath is another example of doom and gloom. Check out the lead to this story:
"The California real estate market will remain sluggish through at least 2008 and spark widespread layoffs among construction and financial firms, according to the latest UCLA Anderson Forecast."
This article says nothing more than what everyone knows already. What amazes me is that it took all the brainiacs at UCLA to state the obvious. The simple facts are:
- Markets go up and markets go down.
- When markets go up lots of people make money and when markets go down lots of people have to find other ways to make money.
The fact that a slow down in real estate sales may cause a slow down in building of new properties is obvious to the most casual of observers and doesn't require a university study. The question is not if things are slowing down or if jobs will be lost, but what do we do about it?
In general in a buyer's market if you own property and do not have to sell for financial or other reasons, hold. This is particularly true if you are living in the property or if its income property that is generating positive cash flow. If you have to sell the property, price it aggressively so it will sell. There’s nothing more painful that sitting in your house waiting for buyers who never come.
If you are thinking of buying a home remember that it's called a buyer's market for a reason. The buyer's hold all the cards. Remember the keys to investing are time and timing. If you're a buyer, the timing may be right. The question is how long you will be holding the property (time). Historically, southern California property appreciates over time in almost any market. If you are planning on holding the property for enough time buying may be a no-brainer.
If you got into the real estate, mortgage or building profession during the boom you may have to make some changes in the way you do business in order to survive. You may need to explore new approaches to your business marketing and structure. For some it will simply amount to stepping out of the business during the slow down and moving back in when it’s booming again. This has been going on for at least 50 years that I know of.
So, don't let Chicken Little freak you out. The sky is not falling. The real estate market is not bad. It's just different and it requires that we approach it from a different point of view.
Do you need a power of attorney? Let’s see.
By Your Real Estate Dude
There are times when a power of attorney can keep an escrow going that would otherwise come to a halt. But perhaps we should start by explaining what the heck a power of attorney is in the first place. Not being an attorney myself, I will give you the “average joe” description of a power of attorney and maybe we can sweet talk the Lawyer Dude into explaining it more clearly later. For the moment let’s just say that a power of attorney is used to give permission for one person to sign for another. For example: I might sign a power of attorney giving my wife the power to sign my name to documents if it were difficult for me to sign for various reasons. She would then be able to sign documents and make agreements for me. So how is this useful in real estate?
There are many circumstances in which a power of attorney can be very useful. Here are a couple of examples:
Recently, I represented sellers who used a power of attorney to complete the escrow in the sale of their home. During the escrow the wife became quite ill and had to be hospitalized. I made trips to the hospital to go over various documents with them, but it became very clear that this was a tremendous strain on her. During one of my visits I suggested that she sign a power of attorney so that her husband could take care of the paperwork and she could get some rest and concentrate on getting well. Frankly, she was feeling miserable and was overjoyed at the prospect of not having to sign or fill out any more paperwork. She signed a power of attorney that day. Her husband took care of the escrow, the doctors took care of her and I was able to take care of some running around for him so he was able to spend time with her doing something other than signing paperwork.
I have represented military families on many occasions. Quite often one of them is on deployment, out to sea or otherwise unavailable for signatures. In one particular case I showed homes to the husband who took pictures which he emailed to his wife who was out to sea. When we found a home that both of them liked, I drafted an offer which he signed using a power of attorney. The offer was accepted and escrow closed without his wife ever seeing the house in person. When she returned from deployment, I visited the couple. To be honest, I was kind of worried that she might be disappointed having only seen the house in pictures to that point. She was not! She loved the place. Yet another instance in which a power of attorney made things possible that otherwise may not have been.
If you’re in a situation in which one of you is unable to deal with the paperwork, a power of attorney may be the way to go. But, let’s not forget that when you sign a power of attorney you are giving someone else the right to make legal commitments for you. So, before you sign make sure you have talked to a good lawyer and gotten the advice you need.
Monday, September 25, 2006
So Your House Isn’t Selling
By your real estate dude
If you have your house on the market at the moment and it isn’t selling, it’s probably no consolation to know that you have plenty of company. There are a zillion homes for sale around San Diego County and not enough buyers to purchase them. Sellers are getting frustrated, agents are running and hiding from their angry clients and guys like me are writing about the whole thing. I know what you’re thinking “So, smart guy… tell me something I don’t know!”
The other day I received a piece of marketing stuff from a lender friend of mine who asked me what I thought of it. It was a list of the top 20 things a seller should do in order to sell the house quicker. It was kind of like reading David Letterman’s top ten and just about as useful. Everything was listed from cleaning up the house to buttering up the buyers. Even the old “bake some cookies” trick was on the list. Now, don’t get me wrong, making the house presentable is always positive. But making a $500,000 house presentable will not get it to sell for $575,000 no matter how many cookies you bake.
Realtors have known what to do to get your house to sell for as long as people have been selling houses and they’ve been afraid to tell you for just as long. So, as your real estate dude, I’m going to step out on a limb and tell you the hard truth. The best and most effective thing a seller can do to sell the house is price it right. If you price it too high, it will sit. If you price it right at market value in this kind of market, it will sit. Without a competitive edge, your house will look like every other house in the price range. If you want to sell it, you have to get everyone’s attention focused on your house. You have to price it aggressively to get it ahead of the downward price curve. Do this and all of a sudden your house becomes “The Deal” in the minds of buyers and their attention focuses in your direction.
I know this is a hard pill to swallow and you may think its bologna. You may even be thinking I’ve gone bonkers, wacko, round the bend, cuckoo, bats in my belfry, nuts even to suggest that you drop your asking price. But, I sold three homes in August by using this strategy while other homes continue to sit. All three clients are thrilled. I should add that all three homes received multiple offers, we were able to start a bidding war and all three sold for more than the asking price. I can’t guarantee this will happen in your case, but you have a much better chance making it happen pricing your home aggressively than you do by having another open house and preheating the oven for yet another batch of cookies!
If your home isn’t selling, take heart. This market isn’t bad, it’s just different. The good thing is that while every market comes with its own problems, there is a strategy to deal with all of them.
If you have your house on the market at the moment and it isn’t selling, it’s probably no consolation to know that you have plenty of company. There are a zillion homes for sale around San Diego County and not enough buyers to purchase them. Sellers are getting frustrated, agents are running and hiding from their angry clients and guys like me are writing about the whole thing. I know what you’re thinking “So, smart guy… tell me something I don’t know!”
The other day I received a piece of marketing stuff from a lender friend of mine who asked me what I thought of it. It was a list of the top 20 things a seller should do in order to sell the house quicker. It was kind of like reading David Letterman’s top ten and just about as useful. Everything was listed from cleaning up the house to buttering up the buyers. Even the old “bake some cookies” trick was on the list. Now, don’t get me wrong, making the house presentable is always positive. But making a $500,000 house presentable will not get it to sell for $575,000 no matter how many cookies you bake.
Realtors have known what to do to get your house to sell for as long as people have been selling houses and they’ve been afraid to tell you for just as long. So, as your real estate dude, I’m going to step out on a limb and tell you the hard truth. The best and most effective thing a seller can do to sell the house is price it right. If you price it too high, it will sit. If you price it right at market value in this kind of market, it will sit. Without a competitive edge, your house will look like every other house in the price range. If you want to sell it, you have to get everyone’s attention focused on your house. You have to price it aggressively to get it ahead of the downward price curve. Do this and all of a sudden your house becomes “The Deal” in the minds of buyers and their attention focuses in your direction.
I know this is a hard pill to swallow and you may think its bologna. You may even be thinking I’ve gone bonkers, wacko, round the bend, cuckoo, bats in my belfry, nuts even to suggest that you drop your asking price. But, I sold three homes in August by using this strategy while other homes continue to sit. All three clients are thrilled. I should add that all three homes received multiple offers, we were able to start a bidding war and all three sold for more than the asking price. I can’t guarantee this will happen in your case, but you have a much better chance making it happen pricing your home aggressively than you do by having another open house and preheating the oven for yet another batch of cookies!
If your home isn’t selling, take heart. This market isn’t bad, it’s just different. The good thing is that while every market comes with its own problems, there is a strategy to deal with all of them.
Your Real Estate Dude Interviewed By HouseValues.com
By your real estate dude
This past week I was interviewed by HouseValues.com for their Mastermind Forum. Sounds fancy, but I promise not to get a fat head. There were about 1,000 real estate agents on a conference call that included the United States and Canada. It was very cool. A few days later I was asked to speak at a conference held by the same company at the Sheraton Hotel on Harbor Island.
The focus of the interview and the speaking engagement was to help these agents dial-in their marketing efforts and generate more business. What was interesting to me was how many realtors were having trouble in the first place. This is yet another indicator that the market has changed in more than just the San Diego area. I had agents on the conference call asking me questions as far east as New York and as far north as Ontario. Why do you suppose that is?
Like any other business, folks come out of the woodwork to make some money in real estate when it’s hot and fizzle out when it cools down. After a while they just fade away, leaving the long term professionals to continue the remaining business. That may not seem to be important from the point of view of the average person looking to buy or sell a home, but truthfully it has a lot to teach us. For example: if you had the choice of hiring a short timer who only got in the business to make a quick buck or the long timer with years of experience and a dedication to the profession whom would you choose? I bet I know what the answer would be if you were choosing a brain surgeon! Why, then, should your answer be any different when you’re hiring a realtor to sell your home or help you buy one?
The bottom line is the market has changed, so the part timers are bailing. Take the advice of a long timer and hire someone who has been around a while and will be around later when you need him.
This past week I was interviewed by HouseValues.com for their Mastermind Forum. Sounds fancy, but I promise not to get a fat head. There were about 1,000 real estate agents on a conference call that included the United States and Canada. It was very cool. A few days later I was asked to speak at a conference held by the same company at the Sheraton Hotel on Harbor Island.The focus of the interview and the speaking engagement was to help these agents dial-in their marketing efforts and generate more business. What was interesting to me was how many realtors were having trouble in the first place. This is yet another indicator that the market has changed in more than just the San Diego area. I had agents on the conference call asking me questions as far east as New York and as far north as Ontario. Why do you suppose that is?
Like any other business, folks come out of the woodwork to make some money in real estate when it’s hot and fizzle out when it cools down. After a while they just fade away, leaving the long term professionals to continue the remaining business. That may not seem to be important from the point of view of the average person looking to buy or sell a home, but truthfully it has a lot to teach us. For example: if you had the choice of hiring a short timer who only got in the business to make a quick buck or the long timer with years of experience and a dedication to the profession whom would you choose? I bet I know what the answer would be if you were choosing a brain surgeon! Why, then, should your answer be any different when you’re hiring a realtor to sell your home or help you buy one?
The bottom line is the market has changed, so the part timers are bailing. Take the advice of a long timer and hire someone who has been around a while and will be around later when you need him.
Thursday, December 01, 2005
Median price of a home in California at $538,770 in October, up 17.2 percent from year ago; sales decrease 2.8 percent
The following is from the California Association of Realtors. To read the news release in full, click on the link above.
C.A.R. REPORTS MEDIAN HOME PRICE INCREASED 17.2 PERCENT IN OCTOBER
The median price of an existing, single-family detached home in California during October 2005 was $538,770, a 17.2 percent increase over the revised $459,530 median for October 2004, C.A.R. reported. The October 2005 median price decreased 1 percent compared with September's $543,980 median price.
"While California is still experiencing year-over-year double-digit price appreciation, prices are starting to level off compared with the statewide peak reached in August 2005," said C.A.R. President Vince Malta. "Regionally, the median price continues to post strong gains, with the High Desert, Riverside/San Bernardino, and San Luis Obispo regions hitting record highs last month."
Closed escrow sales of existing, single-family detached homes in California totaled 621,530 in October at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 2.8 percent from the 639,570 sales pace recorded in October 2004.
C.A.R. REPORTS MEDIAN HOME PRICE INCREASED 17.2 PERCENT IN OCTOBER
The median price of an existing, single-family detached home in California during October 2005 was $538,770, a 17.2 percent increase over the revised $459,530 median for October 2004, C.A.R. reported. The October 2005 median price decreased 1 percent compared with September's $543,980 median price.
"While California is still experiencing year-over-year double-digit price appreciation, prices are starting to level off compared with the statewide peak reached in August 2005," said C.A.R. President Vince Malta. "Regionally, the median price continues to post strong gains, with the High Desert, Riverside/San Bernardino, and San Luis Obispo regions hitting record highs last month."
Closed escrow sales of existing, single-family detached homes in California totaled 621,530 in October at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity decreased 2.8 percent from the 639,570 sales pace recorded in October 2004.
Mortgage shopping: what you should know before you begin
When they enter the mortgage market, in contrast, where their financial commitment may be 10 times larger, many consumers don't have a clue as to what they want. They look to the loan provider to guide them through the maze. This dependency is one major reason they often end up with a mortgage that is over-priced and, even worse, does not meet their needs.
This article poses eight questions that prospective borrowers should ask themselves before entering the market.
What type of mortgage should I select?
The major decision is between fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). ARMs have lower payments in the early years than FRMs but expose borrowers to the risk of higher payments in later years. ARMs with the lowest early-year payments have the greatest risk of future rate and payment increases.
Which mortgage options should I select?
The major options are to waive the obligation to maintain an escrow account for taxes and insurance payments, which will cost you a little; an interest-only payment option, which also costs little; and a prepayment penalty, in exchange for which the lender will usually pay you.
How long of a term should I take?
The term of a mortgage is the period used to calculate the mortgage payment. The longer the term, the lower the mortgage payment but the slower you pay down the balance. Term selection is an issue primarily on FRMs, which are available at terms ranging from 10 years to 40 years. While 15-year and 40-year ARMs exist, most lenders offer only 30-year ARMs.
How many points should I pay?
Points are fees you pay the lender at the time the loan is closed, expressed as a percent of the loan. On a $100,000 loan, two points means a payment of $2,000. The more points you pay, the lower the interest rate. Hence, points should be viewed as an investment on which the return is higher the longer you have the mortgage.
How large a down payment should I make?
The down payment is the difference between the loan amount and the lower of the sale price or appraised value. If you have discretion over how much to put down, the down payment, like points, is best viewed as an investment. Investment in a larger down payment can yield a high return if it flips the loan into a lower mortgage insurance or interest rate category.
If I put less than 20 percent down, what type of mortgage insurance should I select?
Borrowers who put down less than 20 percent are charged for the risk they impose on lenders. However, borrowers often can choose how to pay. One option is to pay a premium to a private mortgage insurance company (PMI) selected by the lender. A second option is to pay the lender a higher interest rate, which is called lender-provided mortgage insurance (LPMI). In this case, the lender purchases insurance from a PMI, though not always. The third option is a "piggyback" arrangement, where the borrower takes out a first mortgage for 80 percent of property value, and a higher-rate second mortgage for the balance of the funds needed.
How long a lock period do I need and when should I lock?
The lock period is the period during which the lender guarantees the rate and points: the longer the lock period, the higher the price. Borrowers must choose when to lock and for how long.
What documentation requirements should I seek?
A lender's "documentation requirements" stipulate the information about the borrower's finances that must be provided and how this information will be verified, and then used by the lender. Lenders offer choices ranging from "full documentation" to "no-docs." Because the risk to the lender rises as documentation requirements become less stringent, the price of the mortgage rises correspondingly. Borrowers may or may not have any leeway, depending on what documentation they can provide.
Copyrighted 2005 Inman News
This article poses eight questions that prospective borrowers should ask themselves before entering the market.
What type of mortgage should I select?
The major decision is between fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). ARMs have lower payments in the early years than FRMs but expose borrowers to the risk of higher payments in later years. ARMs with the lowest early-year payments have the greatest risk of future rate and payment increases.
Which mortgage options should I select?
The major options are to waive the obligation to maintain an escrow account for taxes and insurance payments, which will cost you a little; an interest-only payment option, which also costs little; and a prepayment penalty, in exchange for which the lender will usually pay you.
How long of a term should I take?
The term of a mortgage is the period used to calculate the mortgage payment. The longer the term, the lower the mortgage payment but the slower you pay down the balance. Term selection is an issue primarily on FRMs, which are available at terms ranging from 10 years to 40 years. While 15-year and 40-year ARMs exist, most lenders offer only 30-year ARMs.
How many points should I pay?
Points are fees you pay the lender at the time the loan is closed, expressed as a percent of the loan. On a $100,000 loan, two points means a payment of $2,000. The more points you pay, the lower the interest rate. Hence, points should be viewed as an investment on which the return is higher the longer you have the mortgage.
How large a down payment should I make?
The down payment is the difference between the loan amount and the lower of the sale price or appraised value. If you have discretion over how much to put down, the down payment, like points, is best viewed as an investment. Investment in a larger down payment can yield a high return if it flips the loan into a lower mortgage insurance or interest rate category.
If I put less than 20 percent down, what type of mortgage insurance should I select?
Borrowers who put down less than 20 percent are charged for the risk they impose on lenders. However, borrowers often can choose how to pay. One option is to pay a premium to a private mortgage insurance company (PMI) selected by the lender. A second option is to pay the lender a higher interest rate, which is called lender-provided mortgage insurance (LPMI). In this case, the lender purchases insurance from a PMI, though not always. The third option is a "piggyback" arrangement, where the borrower takes out a first mortgage for 80 percent of property value, and a higher-rate second mortgage for the balance of the funds needed.
How long a lock period do I need and when should I lock?
The lock period is the period during which the lender guarantees the rate and points: the longer the lock period, the higher the price. Borrowers must choose when to lock and for how long.
What documentation requirements should I seek?
A lender's "documentation requirements" stipulate the information about the borrower's finances that must be provided and how this information will be verified, and then used by the lender. Lenders offer choices ranging from "full documentation" to "no-docs." Because the risk to the lender rises as documentation requirements become less stringent, the price of the mortgage rises correspondingly. Borrowers may or may not have any leeway, depending on what documentation they can provide.
Copyrighted 2005 Inman News
What type of real estate makes the best investment?
By Dian Hymer
During the economic downturn of the early 1990s, a home in the Crocker Highlands area of Oakland, Calif., sold twice in two years. The house did not change substantially during this time, nor did its price. But, average prices in the neighborhood dropped about 15 percent during the same time.
Some homes hold their value better than others. It makes sense to pay particular attention to what you buy and where if you're worried that the housing market is overdue for a correction.
What did the Crocker Highlands home have that caused it to be more desirable than other listings? It had a good floor plan. There were four bedrooms on one level. The master bedroom had its own bathroom, and there were two additional bathrooms.
The house was an older home, built in the 1920s, but it had been extensively renovated with quality, high-end finishes. There was no deferred maintenance. It had a spacious eat-in kitchen/family room that opened directly out to a level, private and sunny backyard. It was a house that was easy to live in and it required no work.
The house was also located on one of the best streets in neighborhood. What made it such a desirable street? It was not a thoroughfare, so the traffic was minimal. It was quiet. Yet, it was within walking distance of the local school. The street was virtually level so children could ride bikes and it was easy for homeowners to get in and out of their driveways. There was plenty of street parking for guests.
This is not to say that you shouldn't buy a home unless it includes all the desirable qualities of this particular Crocker Highlands home. However, it does make sense to keep resale value in mind when you're considering a home purchase, particularly if you don't intend to stay there forever.
Other attributes that tend to add to resale value are good storage space, a garage, a bathroom on each level and a convenient location. Good views tend to add value, and so does easy access in and out of the house.
One-level homes are usually in high demand, especially with older home buyers. Two-story homes are often preferred by younger buyers. Homes that are on three or more levels tend to sell for less than a similar sized home with only one or two levels.
It can be difficult to find a home with a good floor plan, good indoor-outdoor living and the right number of bedrooms and baths that is also in top condition. If you're up for the challenge, consider buying a home that you can improve over time. But, first make sure that the basic structure is sound and the floor plan is good.
Also, get a handle on how much you'll need to invest in the property before you start negotiating with the seller. Don't pay an inflated price for a house that needs work.Location is one of the most important indicators of value in residential real estate.
Neighborhoods with good public schools tend to have higher property values than areas where schools are a problem. Close proximity to a major metropolitan area has a positive effect on home values, particularly if there's good transportation.
Neighborhoods where the residents are predominantly owner-occupants tend to be more desirable than neighborhoods where most of the homes are owned by absentee landlords.
THE CLOSING: The local economy directly affects home values, and so does supply and demand. Areas with a lot of building can end up with a glut of homes for sale when there is a correction in the housing market. This can depress local property values.
Copyright 2005 Inman News
During the economic downturn of the early 1990s, a home in the Crocker Highlands area of Oakland, Calif., sold twice in two years. The house did not change substantially during this time, nor did its price. But, average prices in the neighborhood dropped about 15 percent during the same time.Some homes hold their value better than others. It makes sense to pay particular attention to what you buy and where if you're worried that the housing market is overdue for a correction.
What did the Crocker Highlands home have that caused it to be more desirable than other listings? It had a good floor plan. There were four bedrooms on one level. The master bedroom had its own bathroom, and there were two additional bathrooms.
The house was an older home, built in the 1920s, but it had been extensively renovated with quality, high-end finishes. There was no deferred maintenance. It had a spacious eat-in kitchen/family room that opened directly out to a level, private and sunny backyard. It was a house that was easy to live in and it required no work.
The house was also located on one of the best streets in neighborhood. What made it such a desirable street? It was not a thoroughfare, so the traffic was minimal. It was quiet. Yet, it was within walking distance of the local school. The street was virtually level so children could ride bikes and it was easy for homeowners to get in and out of their driveways. There was plenty of street parking for guests.
This is not to say that you shouldn't buy a home unless it includes all the desirable qualities of this particular Crocker Highlands home. However, it does make sense to keep resale value in mind when you're considering a home purchase, particularly if you don't intend to stay there forever.
Other attributes that tend to add to resale value are good storage space, a garage, a bathroom on each level and a convenient location. Good views tend to add value, and so does easy access in and out of the house.
One-level homes are usually in high demand, especially with older home buyers. Two-story homes are often preferred by younger buyers. Homes that are on three or more levels tend to sell for less than a similar sized home with only one or two levels.
It can be difficult to find a home with a good floor plan, good indoor-outdoor living and the right number of bedrooms and baths that is also in top condition. If you're up for the challenge, consider buying a home that you can improve over time. But, first make sure that the basic structure is sound and the floor plan is good.
Also, get a handle on how much you'll need to invest in the property before you start negotiating with the seller. Don't pay an inflated price for a house that needs work.Location is one of the most important indicators of value in residential real estate.
Neighborhoods with good public schools tend to have higher property values than areas where schools are a problem. Close proximity to a major metropolitan area has a positive effect on home values, particularly if there's good transportation.
Neighborhoods where the residents are predominantly owner-occupants tend to be more desirable than neighborhoods where most of the homes are owned by absentee landlords.
THE CLOSING: The local economy directly affects home values, and so does supply and demand. Areas with a lot of building can end up with a glut of homes for sale when there is a correction in the housing market. This can depress local property values.
Copyright 2005 Inman News
Wednesday, November 02, 2005
C.A.R. SAYS PROPOSED CHANGE TO DEDUCTIBILITY OF MORTGAGE INTEREST "DOA"
The following is from an article in todays California Association of Realtors newsletter:
The proposed tax reform affecting the deductibility of mortgage interest will be "dead on arrival in Congress," says C.A.R. President Vince Malta. The proposal, submitted yesterday to the U.S. Treasury by the President's Advisory Panel on Federal Tax Reform, recommends converting the mortgage interest deduction to a tax credit equal to 15 percent of interest paid on mortgages, with the mortgage interest cap set to the average regional home price, ranging from $227,000 to $412,000. Currently, homeowners can deduct all the interest on mortgage loans up to $1 million on their primary residence.
"With the median price of a home in California at $543,980 and the average mortgage at least $435,180, the proposed ceiling would limit the tax break for the majority of new mortgagees in the state," said Malta.
Other changes that would negatively impact Californians are the proposed elimination of deductions for the interest paid on second home loans and home equity loans, as well as the elimination of the deduction for state and local taxes. According to NAR, second homes accounted for 36 percent of all home sales last year nationwide.
The proposed tax reform affecting the deductibility of mortgage interest will be "dead on arrival in Congress," says C.A.R. President Vince Malta. The proposal, submitted yesterday to the U.S. Treasury by the President's Advisory Panel on Federal Tax Reform, recommends converting the mortgage interest deduction to a tax credit equal to 15 percent of interest paid on mortgages, with the mortgage interest cap set to the average regional home price, ranging from $227,000 to $412,000. Currently, homeowners can deduct all the interest on mortgage loans up to $1 million on their primary residence.
"With the median price of a home in California at $543,980 and the average mortgage at least $435,180, the proposed ceiling would limit the tax break for the majority of new mortgagees in the state," said Malta.
Other changes that would negatively impact Californians are the proposed elimination of deductions for the interest paid on second home loans and home equity loans, as well as the elimination of the deduction for state and local taxes. According to NAR, second homes accounted for 36 percent of all home sales last year nationwide.
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