Thursday, December 23, 2010

I am so lucky!

I have to tell you as a manager of a real estate office, I hear a lot of things.   Some bad and some good.  Since no one wants to hear the bad, let's focus on the great things!

Here is what some of our customer and clients said.

"Kai was enthusiastic and encouraging at all times.  After each showing she called and game me feedback."

"Dawn and Kim always kept in contact with us which is very important to us."
"Amy was patient, professional and informative."

"Shawn did an excellent job!  He went out of his way to meet our needs."

"Erica put a lot of time and (very much beyond) effort to sell our home."

WOW!!  Great job!!  It makes me happy to work with such great agents!

Thank you!

Remember… Pigs Get Slaughtered

Remember… Pigs Get Slaughtered

Monday, December 13, 2010

The facts about Mortgage Interest Deduction

Commentary: Mortgage Interest and Real Estate Tax Deduction Facts

December 7, 2010

By Danielle Hale, Research Economist
In recent weeks, many proposals, suggesting a variety of changes to the tax system, have been discussed. The estimates below are for the complete elimination of these two tax benefits at current marginal tax rates, one of the most extreme possible changes.
Mortgage Interest Deduction Facts:
• 51 million—or 68 percent—of the approximately 75 million owner-occupied houses in the United States in 2009 had a mortgage.
• 38.5 million taxpayers claimed a deduction for mortgage interest, deducting a total of $470 billion, in 2008.
• The average taxpayer claiming the MID deducted $12,200 from taxable income in 2008.
• Therefore, the average taxpayer saved $3,050 in taxes by claiming the mortgage interest deduction1 .
• The total tax savings from the MID in the United States in 2008 was $117 billion.
Real Estate Tax Deductions Facts:
• 42 million taxpayers in the United States claimed a deduction for real estate taxes in 2008, deducting a total of $172 billion.
• The average taxpayer claiming the real estate tax deduction subtracted $4,090 from taxable income in 2008.
• Therefore the average taxpayer saved $1,020 in taxes as a result of the real estate tax deduction2 .
• The total savings from the real estate tax deduction in the United States in 2008 was $43 billion.
Eliminating Deductions: Losses for Home Owners and the Nation
If the mortgage interest and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value3 of these lost savings could total $3.2 trillion. The value of all owner-occupied real estate in the United States in 2009 was $19.3 trillion4 . If the lost tax savings are fully capitalized into the price of houses, the average decline in value in the United States would be 17 percent. From the individual perspective, the median priced home in the United States in the third quarter 2010 was $177,800. A decline in value of 17 percent, as projected, would mean a loss in home value of $29,500 for the typical home owner.
These estimates, because they are based on a complete elimination of these deductions, can be viewed as a high-end estimate. Other changes will result in smaller losses to home owners. Additionally, national results are computed by looking at national averages. A very different picture can result when looking at the state level depending on the characteristics of the housing market, tax payers, and homeowners. For state information, contact data@realtors.org.
1Marginal rates range from 10 to 35 percent. A 25 percent rate was used to calculate the tax savings.
2Ibid.
3Present value calculation assumes 5 percent discount rate and 1000 year time horizon.
4As measured by the American Community Survey. The Federal Reserve Flow of Funds for 2009 estimated the market value of household real estate to be $17 trillion which would raise the estimate of the decline in value to 19 percent.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.

Good news for 2011!

http://kcmblog.com/2010/12/13/demand-for-housing-will-increase-in-2011/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+KeepingCurrentMatters+%28KCM+Blog%29

Monday, November 15, 2010

Back to Normal?

Here is an article from Lawrence Yun.

The Road to “Normalcy”

by Lawrence Yun, NAR Chief EconomistLawrence Yun

Prior to the recent mid-term elections consumers expressed their troubling unhappiness about their situations. The index measuring confidence about consumers’ present situation, which is based primarily on questions related to the economy, job and personal finances, was 23.9 in October. That is much lower than the neutral 100 mark and essentially at near historic lows – even matching the levels at the depth of the recessions in the early 1980s and early 1990s.
Of course, Americans are a tough-minded people who understand that bad events occur sometimes, but they are always ready to pick themselves up. As Forrest Gump would say, ‘[expletive] happens’ in life, but you keep running. However, what is different this time around is that consumers are decidedly less optimistic about the future. Consider – the consumer confidence index about future expectations is currently 67.8, not as bad as the “present conditions” index, but much lower than the reading of 115 in 1983 when the economy also suffered from the same 9.6 percent unemployment rate that is has today.
Businesses through their actions have also expressed less confidence about the economy. Corporate profits are back up to their peak before the recession, yet business spending has been lackluster. Companies are just sitting on cash and not redeploying that cash back into the economy.
Meanwhile, the housing market is trying to scratch out a decent recovery under its own power without any federal stimulus of a home-buyer tax credit. Existing-home sales (actual closings and not contracts) rose to 4.5 million units (seasonally adjusted annualized rate) in September, a solid 17 percent cumulative gain over two months following the big tumble in July when the tax credit was no longer in effect. Home sales would need to rise to at least the 5-million unit mark to be considered “back to normal” under present circumstances where the total number of jobs is equal to that in the year 2000. Back then, existing-home sales registered 5.2 million units and so 2000 would also have been considered a very normal year without any hints of a housing bubble. The 7.1 million bubble-ish home sales of 2005 is long gone and will not return until both population and job growth over many years can rightly justify such levels.
The currently anticipated housing recovery is about returning to normalcy. All data point toward the market being back to fundamentally justifiable levels. The home price bubble has been fully deflated. The cost of constructing new homes is measurably higher compared to buying a nearly identical existing one. Home sales in relation to total jobs are back to normal. Home price to income ratio is slightly below historical trends, signaling a slight overcorrection. (Charts illustrating these points can be found in my presentation at the NAR Annual Conference in New Orleans. See below for a direct link.)
The return to normalcy, however, will not be a straight upward path. We’ve seen evidence of that already. September’s pending home sales (i.e., contract signings) took a step back after two consecutive months of increases. This type of trend – two steps forward and one step back – is likely to occur in the coming year as well. The underlying fundamentals of rising demand are present in the forms of compelling affordability conditions and from job creation. But while investors appear eager to “get in” as well, they are being hampered by very tight mortgage availability for non-owner occupancy loans. In addition, the hiccups to recovery will also arise from market swings in economic data and from a flow of foreclosed/REO properties reaching the market.
Yes, there was some good news on the job market in October with the creation of 151,000 net new jobs. Indeed, the job market has clearly turned the corner. Since January, about one million private sector job have been created. The pace, however, needs to kick into a higher gear. At the current job creation pace, the economy is just treading water and there will be no meaningful improvement in the unemployment rate. The table illustrates how many years it would take to get the unemployment rate back down to 6 percent.
The mortgage rates are at rock bottom but are still likely to head higher. Even after the announcement of a second try at ‘quantitative easing’ by the Federal Reserve (QE2 in today’s vernacular), which means more purchases of government bonds with freshly printed money, the long-term government borrowing rate rose, perhaps out of future inflationary fears. The 10-year and 30-year Treasury yields in mid-November were 2.6 percent and 4.2 percent, respectively. That is up from 2.4 percent and 3.7 percent, respectively, one month prior.
The QE2 attempt to keep long-term rates lower, which may or may not be working, is inconsequential to the market compared to the importance of returning lending standards to normal from their overly stringent rules currently. A well-known bankers’ axiom says that all bad loans are made in good times. Today’s defaulting mortgages were invariably originated during the bubble years with lax underwriting standards. Both FHA – along with Fannie Mae and Freddie Mac – are reporting that those mortgages originated in the past two years are performing quite well. But the continuing anecdotal stories of good credit-worthy consumers being denied a mortgage probably hint at unreasonably tight underwriting standards. We certainly do not want to return to any lax standards, but denying mortgages to those who are capable of making payments is holding back a true recovery in both the housing market and the broader economy.
Our baseline forecast is for existing-home sales to rise 6 percent in 2011 to 5.1 million units – up from 4.8 million in 2010. New home sales will rise to 400,000 in 2011 from 300,000 this year – a big increase in percentage terms but still well below normal yearly sales activity. Home values are not likely to move in any measurable way, up or down.
But there is more upside potential in relation to the baseline than downside. There are 30 million additional people currently living in the country compared to 10 years ago when home sales were comparable to the forecast figures for next year. Also banks are flush with cash. Non-financial companies are also sitting on a pile of cash. Some releasing of that cash back into the economy will mean a better performance for both the economy and housing than our baseline outlook.
After an election there is generally some boost to consumer confidence. The boost comes from a simple tautology: the majority of people (at least the majority of those who voted) got what they wanted, i.e., the candidates who received the most votes won. Let’s also not underestimate the potential for improvement in consumer confidence and the consequent impact on the housing market. Americans are known for being constantly in motion even after significant economic disruptions. Many top companies were born out of a recession: Microsoft, General Electric, Federal Express to name a few. Americans in general believe in better future for themselves and their children – even though they did not express that view prior to the election. Voting is one direct way to express one’s views. Any corporate manager who thinks consumers are wrong will most certainly drive the company straight into bankruptcy; any politician who thinks voters are wrong will surely drive the country into bankruptcy financially and in other ways. The elected representatives at all levels of government need to understand that