Real estate Newsletter

End Is Near for Certain Tax Exemptions

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End Is Near for Certain Tax Exemptions

Borrowers will have to count mortgage relief from lenders as income on their federal tax returns. That means, for example, a borrower would have to pay taxes on a $100,000 reduction in principal owed on a loan, or a $20,000 write-off in the amount owed after a short sale.

An extension of the tax exemption — established under the Mortgage Forgiveness Debt Relief Act of 2007 — is a strong possibility. But given that Congress will have to grapple with serious fiscal issues after the November elections, there is no guarantee the exemption will emerge from those negotiations intact.

“I’m optimistic in the sense that everyone agrees on the merits of the issue and that it’s good for the market,” said Jamie Gregory, the deputy chief lobbyist for the National Association of Realtors, which is pushing for the exemption’s renewal. “My only caution is the process.”

Goldie Sommer, a real estate lawyer in Fairfield, N.J., who specializes in short sales, says she, too, is hopeful that an extension will come through, but she is taking no chances. Her office staff is doing all it can to make it easier for lenders to sign off on short sales. That means submitting packages only when they include a signed contract and a good-faith deposit from the buyer.

Given that short sales handled by her office take, on average, two to three months to complete, deals being negotiated now are already bumping up against the

Dec. 31 exemption cutoff. “We’re trying to push the short sales now as fast as we can,” Ms. Sommer said, “or our clients will get stuck with a big fat tax bill.”

The Debt Relief Act exemption applies only to canceled mortgage debt used to buy, build or improve a primary residence, not a second home. The maximum exemption is $2 million.

In 2011, the estimated tax savings to borrowers from the exemption was at least $1 billion, according to calculations by the Realtors association.

Reinstating the tax would undercut the effect of the settlement reached earlier this year in the federal government’s investigation into banks’ epic mishandling of foreclosure documents. Under the terms of the settlement, five of the biggest mortgage lenders must put some $17 billion toward debt relief that enables borrowers to stay in their homes. Smaller portions are reserved for short sales and refinancing.

Borrowers in New York and New Jersey would feel considerable pain if the tax exemption expired, because both states have a backlog of foreclosures, said Michael Litzner, the owner/broker of Century 21 American Homes, which has offices on Long Island. The foreclosure process in these states is longer than in any other, according to RealtyTrac. New York has the longest timeline — 1,072 days as of the third quarter, compared with the national average of 382 days.

“There’s a tremendous shadow inventory that’s still looming out there that needs to be mitigated,” Mr. Litzner said. Still, borrowers ought not rush into a short sale decision solely because of the tax issue, said Jason Milligan, the owner of Milligan Realty, in Norwalk, Conn. They should look into whether it applies to their situation, and consider their options.

“For example,” he said, “if you can get another year living in the house for free, then it’s not going to matter so much. And if you’re going bankrupt, you might as well keep shelter over your head as long as you can until they throw you out on the street.”

Mr. Litzner says ending the exemption would be a “huge blow” to the economy. Without it, he predicted, “people will walk away from properties; you take it off the table and people lose the incentive to settle.”

Newport Beach CA luxury homes for sale

 

Restructured HARP Helping More Underwater Homeowners to Refinance

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Restructured HARP Helping More Underwater Homeowners to Refinance
By Hudson Sangree and Phillip Reese of the Sacramento Bee

In the Sacramento area, about 180,000 households, or roughly half of all homeowners with mortgages, owe more than their homes are worth.

Many are stuck paying higher interest rates than today’s ultra-low average of about 3.5 percent on a 30-year loan.

For these families, refinancing to a lower rate would free up cash in a tough economy and help them stay in their houses. Yet until recently, large numbers of homeowners were shut out from refinancing because they owed far more than their homes are worth.

Today, a reworked federal effort called the Home Affordable Refinance Program, or HARP, is helping thousands more refinance, even if they’re deeply underwater on their mortgages.

The HARP restructuring – known as HARP 2.0 – took effect late last year and opened the floodgates for those who had been blocked from refinancing under an earlier, more-restrictive version of the program.

Through July, about 75,000 California homeowners had refinanced under HARP – roughly 25,000 more than the number that refinanced under the program during all of 2011.

“A lot of those folks had already applied for HARP and been declined,” said Tai Mamea, vice president for mortgage lending at Chase bank. “Sometimes they’ve been waiting for years.”

Chase customers have saved an average of $300 a month by refinancing through HARP, often halving their interest rates, he said.

But HARP 2.0, as it’s known, isn’t the cure-all that some predicted. For some homeowners, frustrations and roadblocks remain.

“I’ve helped lots of families refinance with HARP,” said Brent Wilson, a loan strategist with Comstock Mortgage in Sacramento. “But I still see a huge void of folks upside-down on loans who can’t refinance with HARP.”

A major reason, he said, is that their loans aren’t backed by mortgage giants Freddie Mac or Fannie Mae, a requirement for HARP refinancing. Being up-to-date on mortgage payments is another prerequisite.

Others might have low credit scores or high debt-to-income ratios, or they may lack cash reserves. Depending on the rules of individual lenders, such factors can prevent homeowners from successfully refinancing under HARP, Wilson said.

“You still have to be able to qualify,” he said. “It’s not as clear-cut as some people make it sound.”

Still, federal officials cleared away one of the biggest hurdles, he said.

The original version of HARP, introduced in 2009, allowed a loan-to-value ratio up to 125 percent. To be eligible, homeowners could only owe 25 percent more than their homes were worth. In other words, they could only be slightly underwater.

Many in the Sacramento region have sunk much deeper. One out of five of the region’s homeowners owe at least twice what their home is worth, according to online real estate tracking firm Zillow.

It’s a situation that’s common in other areas of California and in regions of the country – including Florida, Arizona and parts of the Northeast – that experienced a spike in housing prices followed by a calamitous free fall.

That’s why federal authorities restructured HARP so that it lets homeowners refinance regardless of the difference between loan amounts and home values.
Some lenders, however, have their own criteria that they layer on top of the HARP rules, experts said. They can impose loan-to-value caps of 105 percent or 150 percent.

But HARP 2.0 also gives borrowers more freedom to shop around if their current loan servicer won’t help, and mortgage experts say trying different lenders can be a useful strategy.

Folsom resident Angela Sing found refinancing under HARP 2.0 maddening but ultimately rewarding after going to several different lenders.

Sing and her family owed $440,000 on a first and second mortgage from 2003, but their home is worth only about $290,000. Her primary loan was interest only with a 6.8 percent rate.

“We didn’t want to walk away,” Sing said. “We signed the original papers, and we wanted to take responsibility.”

Sing tried twice to refinance under the old HARP program without success.

When the program was overhauled, she was rejected by her lender. So she tried another lender, with similar results. Finally, she tried a third lender and was successful, though not without more setbacks.

At one point, her credit score fell by a few points, and she had to start the whole process over.

“It was incredibly frustrating,” she said.

Earlier this month, after weeks of repeatedly faxing her financial documents to her lender, she’s refinanced into a 30-year loan with a 4.25 percent interest rate that lowered her payments by about $250 a month.

“You really have got to be persistent,” she said.

Pacific Palisades real estate for sale

 

California Home Prices Rise while Overall Sales Fall

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California Home Prices Rise while Overall Sales Fall

SAN DIEGO — California home prices rose in September to a four-year high as the supply of properties for sale remained tight, according to surveys released Monday.

The median price for new and existing houses and condominiums in California reached $287,000, up 15.3 percent from $249,000 in September 2011, DataQuick said. The median rose $6,000 from August to reach its highest level since $301,000 in August 2008.

There were 34,453 homes sold in September, down 2.7 percent from 35,404 last year, DataQuick said. There were fewer business days this September compared with last year, explaining at least part of the first annual decline in 14 months.

The California Association of Realtors reported that buyers faced slimmer pickings.

The broker association’s index of unsold inventory stood at a 3.7 months in September, down from 5.3 months a year earlier. The figure represents how long it would take to sell all existing single-family homes in California at the current sales clip. Supply in a normal market is considered to be six to seven months.

The supply of foreclosed properties continued to dwindle, helping lift the overall sales price because they tend to sell at steep discounts. DataQuick said 17.7 percent of existing homes sold in September were in foreclosure during the previous year, down from 33.8 percent during the same period last year and 58.5 percent in February 2009.

The September surveys show sales were strongest in more expensive coastal areas, while inland regions like the Central Valley and Southern California’s Inland Empire lagged.

The median price for new and existing houses and condominiums in the San Francisco Bay area reached $429,000, up 17.5 percent from $365,000 last year, DataQuick reported. The median price rose $19,000 from August to its highest level since $447,000 in August 2008.

There were 6,850 homes sold in the nine-county Bay area last month, up 1.5 percent from 6,749 last year.

Only 13.9 percent of Bay area homes sold last month had been foreclosed upon in the previous year, down from 25.4 percent a year earlier and 52 percent in February 2009.

DataQuick reported Friday that the median price for new and existing houses and condominiums in Southern California reached $315,000, up 12.5 percent from $280,000 in September 2011. The median rose $6,000 during the month to its highest level since $330,000 in August 2008.

There were 17,859 homes sold last month in the six-county region, a 1.6 percent drop than the same month last year.

Associated Press

Laguna Niguel CA homes for sale

V.A. Loans Surge in Fiscal Year

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V.A. Loans Surge in Fiscal Year
By Lisa Prevost

The department guaranteed almost 540,000 loans in fiscal year 2012, the most since 1994, according to Mike Frueh, the director of loan guarantee service. Compared with five years ago, volume is up some 300 percent.

Low interest rates were part of the draw — about 338,000 of the V.A. loans were for the purpose of refinancing.

Borrowers who already have a V.A.-backed mortgage can get an interest-rate reduction relatively easily. The department’s streamlined refinance program doesn’t require these borrowers to “re-prove” that they qualify, said Nathan Long, the chief executive of Veterans United Home Loans, an online broker of V.A. loans.

“It’s a great benefit not to have to go through all the hoops that you would otherwise have to,” Mr. Long said.

V.A. loans for purchases were up almost 10 percent over the previous fiscal year. For military members who qualify, these home loans offer a financing option that has largely disappeared since the subprime meltdown: no down payment.

“Regardless of where home prices are,” Mr. Long said, “100 percent financing can be a great option for people. We’ve seen 9 in 10 of our borrowers use the full 100 percent.”

Borrowers also benefit in that they don’t have to pay for mortgage insurance. The department does place limits on loan amounts it will guarantee. These range from $417,000 to $1.094 million, depending on the property’s location. In the New York metropolitan area, the limit is $777,500.

The department doesn’t finance its loan programs, but makes them attractive to lenders by guaranteeing a portion of each loan. Individual lenders set the closing costs and the interest rates, which are currently comparable to those on conventional fixed-rate loans. The minimum credit score required to qualify for a V.A. loan is about 620.

Borrowers must also demonstrate that they will have enough monthly income left over after paying personal debts and housing costs to meet levels set by the department for “residual income.” In the Northeast, for loan amounts exceeding $80,000, the residual income level for a family of four is $1,025.

These underwriting standards, while exclusive to the Department of Veterans Affairs, have helped keep the foreclosure rate on its loans much lower than on other loan types, Mr. Long said.

Grant Moon, an Army Reserves captain who served in Iraq, used a V.A. loan to buy his first home, a three-family in Massachusetts, in 2008. He put no money down, and used the rental income to help cover his mortgage.

“I moved in and I was only paying about $300 a month to have my own home,” he said.

Mr. Moon (who has since bought another V.A.-backed house in New Jersey) is now the president of VA Loan Captain, an online service that allows veterans to compare interest rates and terms among lenders.

“We prescreen the lenders and make sure they aren’t trying to take advantage of veterans,” he said.

While V.A. loans can be beneficial to military members with few assets, they are not always the best option. Although the V.A. doesn’t require mortgage insurance, it does charge a funding fee, which can cost more than 3 percent of the loan amount. Paying that fee might not be prudent for a borrower who plans to be in the home for a short period of time, Mr. Moon said.

Disabled veterans may be exempt from the fee.

Given the growing popularity of V.A. loans, the department expects to hit a major milestone this month, when it will very likely guarantee its 20 millionth veteran.

Home Prices Rise for Fifth Month in a Row

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Home Prices Rise for Fifth Month in a Row

NEW YORK (CNNMoney) — The housing market picked up more momentum in August, as the average home price for 20 major cities jumped 0.9%, according to the S&P/Case-Shiller home price index.

The increase marked the fifth consecutive month of gains for the index with all but one city, Seattle, recording month-over-month price increases.
“The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market,” said David Blitzer, spokesman for S&P.

The Case-Shiller report is one of many gauges of housing market health that has turned upbeat in recent months. New and existing home sales have been stronger, inventory of homes for sale has fallen and developers have stepped up building activity.

Slow improvement in the national economy has also boosted the housing market, as have record low mortgage rates. The rates for a 30-year loan have stayed below 3.7% since May. Combined with home prices that are still about a third less than they were when they hit their peak, these record-low rates have made home buying very affordable.

Related: Obama’s housing scorecard

Of the cities S&P’s index covers, Phoenix has roared back the fastest, with a whopping 18.8% year-over-year gain in August. That marks the fourth month in a row of double-digit price hikes. Detroit prices rose 7.6% over the past 12 months and Miami’s grew 6.7%.

Mike Larson, a financial analyst with Weiss Research, remains cautious about the outsized gains in Phoenix and some Florida markets. Much of the return represents “a resurgence in investor demand,” he said. Investors now represent about 27% of the home purchases in the market, according to data from the National Association of Realtors.

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Wells Fargo Sends Refunds to Some FHA Mortgage Customers

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Wells Fargo Sends Refunds to Some FHA Mortgage Customers

The bank says the customers paid unnecessary fees for their loans. If customers cash the checks, they can’t later sue Wells Fargo. Your take? There’s a catch: If you cash the unsolicited check, you can’t sue later.

Thousands of Wells Fargo & Co. home loan customers recently received a surprise in the mail: refund checks from the big bank, along with letters saying they had paid unnecessary fees for their mortgages.

The unsolicited offers of thousands of dollars arrived with a catch — if the borrowers cash the checks, they can’t later sue the No. 1 U.S. home lender. The San Francisco bank said in the letters that borrowers were put into more expensive loans when they could have qualified for cheaper ones.

Analysts said the letters sent to potentially 10,000 Wells Fargo borrowers were a way for the bank to sidestep further litigation over “steering” customers into unfavorable loans — allegations that the government has made about certain Wells Fargo operations in the past.

It’s one in a long series of legal troubles for major mortgage lenders, the five largest of which agreed in February to a $25-billion settlement of accusations that they “robo-signed” foreclosure affidavits and otherwise abused distressed borrowers. Mortgage investors have barraged them with lawsuits over defaulted loans, and the government also recently filed separate complaints against banks including Wells Fargo, JPMorgan Chase & Co. and Bank of America Corp.

“It sounds like they either found some problems themselves or the regulators discovered them and told them to get things fixed,” said Paul J. Miller, an analyst who follows Wells Fargo for Friedman, Billings, Ramsey & Co.

Wells Fargo’s mailed refunds involve government-backed FHA mortgages made from 2009 through 2011. These loans are often made to borrowers with shaky credit or those who can’t come up with the 20% down payments required for conventional loans.

Though they require as little as 3.5% down, the FHA loans are also more expensive because they require borrowers to pay steep insurance payments to protect against a default. However, in this case, the borrowers actually had the down payments or home equity needed to get a conventional loan, bank officials said.

Wells Fargo spokeswoman Vickee Adams said the problematic FHA loans turned up as the bank reviewed operations at two mortgage channels it has closed down: a subprime lending arm, Wells Fargo Financial, and a wholesale arm that made loans through independent brokers.

The bank previously paid a combined $260 million to settle Federal Reserve and Justice Department allegations that its lending, pay and sales quota practices in the home lending business caused borrowers to be placed into higher-cost mortgages. It didn’t admit wrongdoing.

The loans were written as Wells Fargo surged to become the No. 1 originator of loans insured by the FHA. A bank mortgage spokesman said 528,000 Wells borrowers received FHA loans during the years 2009 through 2011, of which fewer than 2%, or 10,560, were offered refunds. He wouldn’t say exactly how many refunds the bank has offered.

Mortgage professionals say banks often make more money packaging FHA loans into mortgage bonds than they do on traditional loans because of the government guarantee. And at the time in question, loan officers often made higher commissions on FHA loans.

The refunds came to light when the Los Angeles Times obtained a copy of one of the letters. The bank never announced them publicly.

Pomona resident Eric Murrillo-Angelo received a $6,676.89 check last month in a letter saying he “may have qualified for a conventional conforming mortgage” instead of the FHA loan he got in March 2010.

“I was really excited,” he said, “although maybe a little leery at first.”

Wells Fargo said a traditional loan would have had about the same interest rate as the FHA loan, but Murrillo-Angelo would not have been charged insurance premiums and higher appraisal and processing fees.

The refund included $4,847.50 for an upfront premium, $1,154.20 in annual premiums and $355 in increased closing costs, plus interest.

“You should understand that by cashing the enclosed check, you agree to release Wells Fargo … from any and all claims relating to Wells Fargo’s origination of a more expensive mortgage loan than the loan for which you may have qualified,” a bold-faced paragraph read.

After thinking the offer over for about a week, Murillo-Angelo cashed the check.

Loan officers were able to earn a commission of about 2.5% of the loan amount for FHA-backed mortgages in 2009, 2010 and part of 2011, said Fred Arnold, past president of the California Assn. of Mortgage Professionals. That compares with 1.75% commissions for conventional loans, he said.

For example, a $350,000 FHA mortgage would yield an $8,750 commission compared with $6,125 for a conventional loan.

“That meant that some unethical loan officers could potentially steer borrowers to the wrong loan,” said Arnold, who noted that regulatory reforms that took effect in 2011 make it impossible to pay a loan officer more for originating one type of loan rather than another.

A Wells Fargo spokeswoman declined to comment directly about the firm’s compensation practices. She instead provided a general statement of the bank’s policies: “We work hard to offer the appropriate loan options so that every borrower receives the appropriate loan based on his or her credit characteristics and personal circumstances and our compensation reflects that commitment,” the statement said.

Meanwhile, the bank — along with others on Wall Street — packaged its loans into mortgage-backed securities for sale to investors. Loans that met certain standards received a guarantee from government-supported housing agencies Fannie Mae and Freddie Mac.

FHA loans, however, received a higher premium when packaged into bonds. They receive a guarantee by the Government National Mortgage Assn., the federal agency known as Ginnie Mae. These securities are a notch safer for investors than Fannie or Freddie bonds, and that made them more appealing for big institutional investors like sovereign wealth funds or mutual funds.

Although the federal government has not pursued criminal prosecutions of bankers at the heart of the mortgage operations that collapsed in 2007, it has stepped up civil lawsuits against the largest originators and securitizers of home loans during the boom.

This month’s federal suit against Wells Fargo was filed by the U.S. attorney’s office in Manhattan, which has brought six mortgage-fraud lawsuits against big banks in the last 18 months. The latest, filed Wednesday, seeks more than $1 billion from Bank of America for allegedly flawed loans that its Countrywide Financial Corp. unit sold to Fannie and Freddie.

By E. Scott Reckard, Los Angeles Times, October 26, 2012, 6:09 p.m.

After Housing Crash People Want New Styles of Houses

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After Housing Crash People Want New Styles of Houses
By Hudson Sangree

As the real estate market starts to recover from its epic crash, home builders, especially those in hard-hit California, are betting that many buyers will want new houses that are different from the big suburban tract homes that proliferated during the boom.

They’re building houses intended to use no more electricity than they produce, houses with separate quarters for aging parents, and houses that are more compact and closer to jobs, shopping and restaurants.

These models target first-time buyers, growing families and downsizing baby boomers — all expected to be among the next wave of homebuyers.
“Coming out of this downturn, people don’t want more of the same,” said Gordon Jones, Northern California president of home building giant Lennar Corp. “They’re saying, ‘We’re not going to make the same mistake again.’ ”

For Miami-based Lennar, that means multi-generational housing. The company’s NextGen model has an attached apartment — with kitchen, laundry, garage and outdoor courtyard — for older parents, adult children who need to move back home, or extended-stay guests.

Recent buyer Ryan Wallace said he and his wife opted for a NextGen house in El Dorado Hills, Calif., so his parents, who live in British Columbia, could come for longer visits to see their children and grandchildren in Northern California.

“It allows them to have their own space and space for us as well,” Wallace said.

Their move to more than doubled their living area to accommodate a growing family.

Kari Chicoine and her husband are heading in the opposite direction — downsizing after their children left for college. They’re moving from a 3,300-square-foot house in El Dorado Hills, Calif., on 1.3 acres to a roughly 2,000-square-foot home in Folsom with a small courtyard.

Their future house is part of the fastest-selling new home community in the region with 21 sales in 11 weeks, according to a recent report by the North State Building Industry Association.

The appeal of the project is that the airy, modern homes — with combined kitchen, dining and living areas — use space efficiently and require little maintenance, said Chicoine.

The couple plans to have a fireplace and fountain in the courtyard, she said.

“With the upkeep of 1.3 acres and cleaning, we never had time to do everything we wanted to do,” Chicoine said. In their future home, with no lawn to mow and fewer rooms, “We can put our effort into making it our little personal Shangri-La and have time to travel.”

The other important factors, she said, is that the development is adjacent to a system of bike trails that traverse the area, and it sits across the street from a large shopping center with dozens of stores and restaurants.

Kevin Carson, president of The New Home Co., said the developer polled focus groups and found that lowering utility bills through energy efficiency was a prime goal for homeowners in coming years. So were features such as more windows, downstairs bedrooms and proximity to jobs and shopping.

The New Home Co., a California startup that opened in 2010, is focused on meeting those needs, he said.

“Home building is a dated industry. It really hasn’t kept up with the times,” he said. “You can’t just keep building houses and expect to have neighborhoods.”

People will also opt for smaller homes in the future, he predicted. “The economic downturn changed the mentality. People are not biting off more home than they can afford,” he said.

Also on the horizon: urban infill projects that take energy efficiency to a new level.

In downtown Sacramento, Calif., developers are putting the finishing touches on a home that they say will be a net-zero-electricity house — meaning it uses no more electricity than it produces with roof-mounted solar panels.

It’s intended as a model for a larger project to be built on an industrial site on the edge of an older, leafy neighborhood.

The first phase will include about 200 homes — from studio apartments to stand-alone houses, said project manager Kevin Smith.

Super-insulating walls, energy-saving appliances and LED lighting are meant to give the development “green” cache. Recycled glass counters, high-tech wiring and highly efficient use of small spaces will add to the appeal, he said.

“It’s an infill product,” said Smith, “for smaller households of empty nesters and young urbanites.”

Pacific Beach/Mission Beach Showcase of Homes

 

Possible End of Mortgage Tax Deduction Worries Homeowners

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Possible End of Mortgage Tax Deduction Worries Homeowners
By Jack Katzanek

Tax reform has been a frequent campaign issue this year, with tax cuts enacted under former President George W. Bush scheduled to expire at the end of this year.

Among the many changes discussed is one beloved by homeowners across the country — the mortgage interest deduction.

If homeowners were no longer allowed to deduct the interest they paid on a mortgage — the only significant deduction for many — it might convince thousands that their best move is to walk away from their homes, experts say. It could also curtail discretionary spending and hurt the retail sector of the economy.

No one knows how large a role tax deductions on mortgage interest will play in the Washington debate as Congress tries to deal with spending and taxes. Experts predict it would be unlikely that any new policy would wipe out the deduction entirely in one year. The more likely scenario would be a phased-in program that starts with expensive houses.

According to a recent Pew Research Center study, the best definition of middle income is about $68,000 for a family of four. Most at that level might contribute something to their church or write a modest check to the Red Cross but are not likely to accumulate enough charitable contributions to make a big difference at tax time.

“I don’t know why they took away the other deductions, like the car notes and the credit cards,” Ronald Newton, a 72-year-old retired shipyard foreman in Menifee, Calif., said, referring to tax code revisions made in the mid-1980s. “About the only thing I have left is my mortgage.”

According to the congressional Joint Committee on Taxation, an estimated 40 million homeowners take the mortgage interest deduction every year, and the average savings is about $600. The mortgage deduction shrinks the federal government’s coffers by $82 billion a year.

Richard Green, director of the Lusk Center for Real Estate at the University of Southern California, testified last year before the U.S. Senate Banking Committee that the deduction, which has been around for almost 100 years, is outdated and does not encourage homeownership.

What it does is encourage debt and spur consumers to purchase bigger houses than they would otherwise. Green told senators a tax credit for buyers would go further in getting first-time buyers into homes.

Research economist John Husing said that many people are still making regular payments on a house purchased for well more than it is worth now and have little cash left over after writing that check.

“If you take away the mortgage interest deduction you’d take away part of their income, and we’re not talking about very wealthy people,” Husing said.
Taking a deduction for mortgage interest is considered an important part of many taxpayers’ financial plan, said Jamil Dada, vice president for investments at Provident Financial Holdings in Riverside, Calif. Frequently he advises clients not to pay down extra mortgage debt and use excess cash to take care of other payments.

The reason, Dada said, is that credit cards and other debt are not tax-deductible.

“It’s more beneficial to have cash flow,” Dada said.

Dada, a ranking official of the National Association of Workforce Boards, said it is unlikely the deduction would be eliminated outright because hitting middle-class taxpayers that hard would be politically dangerous.

Green said his guess is that Congress would look at mortgages worth $1 million first and possibly drop that level down over a period of years.
“It’s one thing to look at an ideal policy, and another to get there,” Green said.

Santa Monica CA Showcase of Homes

 

U.S. Home Prices Make Biggest Jump in 6 Years

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U.S. Home Prices Make Biggest Jump in 6 Years
By Tiffany Hsu

September 4, 2012, 8:19 a.m.

Nationwide home prices shot up 3.8% in July, making their largest year-over-year leap since 2006, according to real estate data provider CoreLogic.

The gain marks the fifth straight rise in the gauge, part of a positive swing following a year and a half of slumps. The last time prices rose so much was in August 2006, when they jumped 4.1%.

Prices in California bounded up 4.4%. Without distressed sales – including foreclosures and short sales – national prices were up 4.3% compared with last July.

The report, coming as a glut of house-hunters clamor after a shrinking inventory, suggests that the real estate market is “clearly seeing the light at the end of a very long tunnel,” said CoreLogic Chief Executive Anand Nallathambi in a statement.

Compared with June, prices got a 1.3% boost in July, according to Santa Ana-based CoreLogic. The company forecasts at least an additional 0.6% monthly improvement in August, or what would be a 4.6% increase compared with 2011.

Arizona led the country in price appreciation with a 16.6% surge, followed by Idaho, Utah, South Dakota and Colorado. Delaware’s 4.8% plunge was the deepest drop-off in prices, with Alabama, Rhode Island, Connecticut and Illinois also suffering major slips.

Housing, though seemingly in a recovery, is still shaky, according to other data. Consumer confidence is up, helping to push pending home sales to a two-year high, but the job market and the overall economy continue to lag.

Rancho Margarita CA Showcase of Homes

 

Housing Recovery Blossoms

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Housing Recovery Blossoms
By Les Christie September 19, 2012

NEW YORK (CNNMoney) — The U.S. housing industry — crucial to any jobs recovery — showed more signs of strength, according to two reports issued Wednesday.

The Census Bureau said housing starts and permits rose substantially in August. Separately, sales of previously occupied homes climbed 7.8% from a year ago, according to the National Association of Realtors.

Builders started on new homes at an annual rate of 750,000, up 29.1% compared with a year earlier. They applied to build another 803,000 new homes on an annual basis, a 24.5% jump compared with August 2011.

Home builders have become increasingly bullish — a confidence index from the National Association of Home Builders reached its highest level since June 2006.

Even after recent gains, housing starts lag well behind the peak set in May 2005, when the pace of building hit more than 2 million homes.
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If sales continue to gain steam, that could help the nation break out of its economic doldrums. Home building provides many good-paying jobs, about three hires for every home built in a year, according to the National Association of Home Builders.

A rebound would create other jobs too: factory jobs at carpet and furniture makers, for example. Truckers get work transporting all those goods.
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Most housing markets around the nation have reached a good balance between sellers and buyers, according to the Realtors’ chief economist, Lawrence Yun. There’s a 6.1 month supply of homes on the market at the current pace of sales. That’s down from 6.4 months in July and 8.2 months a year earlier. The lower supply provides some support for prices.

The housing market has shown several signs of life over the last few months with sales of existing homes, new home sales and home prices all turning positive.

Historically low mortgage rates have helped propel the market forward. This week, rates appear to be headed for new lows, following last week’s announcement from the Federal Reserve that it would begin to purchase tens of billions in mortgage securities each month.
The Fed’s move “provided the financial support to the mortgage market and signaled an intention to keep rates low for the foreseeable future,” said John Tashjian, who runs a real estate investment fund, Centurian Real Estate Partners.

According to Tashjian, the real benefit of the Fed’s action could be to increase lending volume. The banks, knowing that any well underwritten mortgage will find a ready market, should be more willing to approve mortgages.

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Prices are on the upswing as well. They have benefited from a change in the mix of homes sold with distressed properties — repossessed homes and short sales — accounting for only 22% of total sales, down from 31% last August.

The median home price grew 9.5% year-over-year to $187,400. That marked the sixth consecutive month of price increases, the first time that has happened since May 2006, near the very peak of the housing price boom.

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