4 Keys Identified for a Full Housing Recovery

In order to have a fully recovered housing market and economic recovery, economists point to the need for four positive indicators: 

1. A healthy job market with low stable unemployment; 
2. Mortgage delinquencies that have returned to historical averages; 
3. Home prices consistent with an affordable mortgage payment–to–income ratio; and 
4. Home sales that are in the range of historical norms. 

So, is the housing market inching closer?

Freddie Mac’s U.S. Economic and Housing Market Outlook for January takes a look at how the housing market is performing among these four indicators. Economists note that the unemployment rate -- while inching down -- still remains high at 6.7 percent. Meanwhile, mortgage delinquencies have fallen to 5.88 percent -- nearly half of their peak rate but still higher than the national average of about 2 percent, Freddie notes. 

Home prices still have some room to grow without outpacing income growth, economists say. 
“From 1999–2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth,” Freddie Mac notes in the report. “Currently, payment-to-income ratios are only 60 percent of the level we had in 1999, suggesting room for continued housing growth.” 

Finally, home sales have risen over the past two years but remain below levels from a nearly a decade ago. Home sales, historically, average a rate of about 6 percent of the housing stock every year. They dropped to 4 percent during the housing crisis. Economists are predicting a 5.7 percent pace in 2014. 
"As we start 2014, the housing recovery continues its steady pace,” Frank Nothaft, Freddie Mac’s chief economist. “House-price gains will likely moderate from last year's pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak."


Source: Freddie Mac and “Are We There Yet? Freddie Mac Says Recovery Has a Ways to Go,” Mortgage News Daily (Jan. 16, 2014)

Is Your Listing Offensive?

Real estate ads are getting a big dose of political correctness, as real estate professionals are carefully watching their words in listings so as not to offend anyone. 

Major home builders in Washington, D.C., reportedly are no longer using the term “master bedroom” in their marketing because, they say, it has racist undertones. Instead, the term is being replaced with “owner’s suite.” Others in the real estate community are also carefully choosing their words to avoid potential conflicts with the Fair Housing Act.

“You can say ‘family room’ but not ‘family home,’” explains Beth Brody, a licensed real estate agent in Marin County, Calif. “We avoid anything gender-specific like ‘his-and-hers’ closets or baths.” Brody says her real estate agency carefully monitors the language used in its agents’ listing ads, adding that the list of potentially offensive words has grown over the years. 

Doing so could save a lot of trouble. For example, in August, the 6th U.S. Circuit Court of Appeals reversed a ruling and granted a new trial to the Miami Valley Fair Housing Center in a federal discrimination lawsuit over an Ohio apartment listing that used the phrase “bachelor pad.” 

The U.S. Department of Housing and Urban Development has never issued an official list of terms to avoid, but some MLSs have. The Northwest Multiple Listings Service issued a list of “potentially offensive words,” such as “newlyweds,” “country club nearby,” “handyman’s dream,” “safe neighborhood,” “secure,” and “walking distance to.” (After all, one person’s idea of what is nearby may not be someone else’s, and “walking distance” may be prejudicial against someone in a wheel chair, agents note.)

Lesley Walker, associate counsel at the National Association of REALTORS®, says, “Our culture and society are now more in tune with the sensitivities of more groups of people. I think we’re more aware and educated, and so [we are] taking more precautions not to inadvertently or expressly discriminate against a specific class of people.”

Source: “You Can’t Say That ... in a Real Estate Ad!” The Examiner (Jan. 15, 2014)

Weekly Events in Salt Lake City and Beyond...

Weekly Event Update

January 14, 2014

EVENT SPOTLIGHT:

2014 Sundance Film Festival January 16-26, 2014 Various Locations The 2014 Sundance Film Festival will be held January 16-26th, with films being shown in various locations in Park City, Salt Lake City, Ogden and Provo's Sundance Resort. < More Info

FEATURED EVENTS:

"Bonnie & Clyde" January 7 - February 1, 2014 Lehi Arts Center - Lehi     Utah Repertory Theater Company presents the Utah premiere of Bonnie & Clyde. The musical follows the true story of famous outlaws Clyde Barrow and Bonnie Parker, with music by Frank Wildhorn (composer of Jekyll & Hyde, The Scarlet Pimpernel and The Civil War).   < More Info

do it Opening January 17, 2014 Utah Museum of Contemporary Art - Salt Lake City     Curated By Hans Ulrich Obrist, Organized by Independent Curators International (ICI) With more than 50 stops worldwide, "do it" has become the largest collection of DIY, instructional works to date, including newly commissioned pieces from artists selected by Obrist and ICI.   Based on written instructions by renowned artists as a point of departure, UMOCA's reenactment of "do it" is uniquely site-specific to Utah through the engagement with the community and use of resources available locally.   < More Info

VISA U.S. Freeskiing Grand Prix - Halfpipe and Slopestyle January 17-18, 2014 Park City Mountain Resort - Park City   The U.S. Grand Prix returns to Park City Mountain Resort in 2014. This will be the first year that Halfpipe skiing and slopestyle skiing competitions will be held in the Winter Olympics. After the competition, they will be announcing the official United States Freesking & Slopestyle Olympic Team. This will be a huge event on Utah's Road to Sochi!   < More Info

Boomerang Buyers Could Boost Housing Market

(MCT)—Some housing experts are trumpeting changes that allow foreclosure sufferers to
buy back into the American Dream sooner than they probably imagined, calling 2014 the year
of the “boomerang buyer.”

Revisions made over the summer to Federal Housing Administration guidelines and
technical updates in November to Fannie Mae loan approval systems have opened the door
for some former homeowners to buy again just one year after foreclosure .

Founders of the San Diego-based company AfterForeclosure.com says last month that
millions of banned borrowers nationwide will be eligible for a mortgage this year, while
Jupiter mortgage broker Skip McDonough says his firm is already doing deals with
homebuyers who were forced into default during the housing bust.

“The old-fashioned way of doing it was a seven-year waiting period,” says McDonough,
president of Family Mortgage. “That’s changed, and people who don’t believe they can
qualify are qualifying.”

 Go to Article

A Guide to Taxes as a Homeowner

Oh oh...it's that time of year!
Hey there, homeowner! We’re happy you’ve got a slice of the American dream, and you’ll get the tax breaks that go along with it. In fact, some of these tax incentives apply to even a second home. Ooh la la!

Whether you bought, sold or just happily lived in your home this year, we’ll walk you through all the tax stuff you need to know.

Just skim the “If you …” headers to find the sections that affect you.

If You Paid Interest on Your Mortgage …

You should have received a form 1098 from your lender, which will tell you how much mortgage interest you paid. You can deduct 100% of your mortgage interest and property taxes, as long as your loan is less than $1 million, ($500,000 if you are married and filing separately). If it’s over that, the IRS will limit your deduction. But here’s the catch: You have to itemize in order to claim the deduction. This is a choice that takes a little math and thought. But basically, you calculate your total itemized deduction, compare it against the standard deduction and then take the higher deduction.

You can also deduct late payment charges (please don’t consider this an incentive to pay late) and pre-payment penalties.

If You Paid Property Tax …  (Hint: You Did)

The property tax you pay each year is deductible. Usually these property taxes are paid as part of your monthly loan payments, so you can find that information on the annual statement from your lender. Real estate taxes can be deducted on federal returns even though they may not be deductible in the state where the property is situated.

If You Had a Loan Forgiven …

Depending on the time of debt, if a lender canceled it, you could be taxed as though that canceled debt were income. For example, if you had a mortgage of $10,000, paid $2,000 and the bank canceled the rest, you would be taxed as though you had $8,000 of income.

However, thanks to the Mortgage Debt Forgiveness Relief Act of 2007, the IRS will not charge income tax on a canceled debt. That means if you got a loan modification, short sale or foreclosure on your primary residence, you won’t be hit with a tax bill for it. This applies to up to $2 million in debt ($1 million if you are married, filing separately), that you took on to:

·  Buy your primary home

• Improve your primary home
• Refinance the loan for your primary home

This will only be in effect through 2012, so if you are considering a loan modification or other cancellation of debt, try to fit it in this year if possible.

If You Made Energy-Efficiency Improvements to Your Home …

The Nonbusiness Energy Property Credit is for homeowners who made energy-efficient improvements such as installing insulation, new windows or furnaces. For 2011, you can get a credit worth 10% of the cost of the qualified efficiency improvements you made. You can claim up to $500 over your lifetime.

What if your electricity comes from your own green sources? You should check out the Residential Energy Efficient Property Credit. This credit gives homeowners 30% of what they spend on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines and fuel cell property. No cap exists on the amount of credit, except for fuel cell property.

If in this coming year you decide you want to go green for your home, the IRS suggests that you check for a certification statement that the item is eligible for a tax credit before you purchase. This can normally be found on the packaging or the company’s website. Full details are available on Form 5695.

If Your Home Was Damaged in a Disaster …

If your home was damaged by a disaster like a tornado or fire, you might be able deduct the amount that wasn’t reimbursed by home insurance. To do so, you need to know your AGI. Then multiply that by 10%, and subtract that and $100 from the amount of damage not reimbursed.

Example: Let’s say your home sustained $20,000 in hurricane damage, but you were only reimbursed $10,000 by your insurance company. $20,000-$10,000 = $10,000 in unreimbursed damage. Your AGI is $70,000, so $70,000 x 10% = $7,000. $10,000 – $7,100 = $2,900 in deductible damage.

Special Note: Should You Take the Home Office Deduction?

Provided you are actually eligible for the home office deduction (learn more so you don’t get audited), deducting the expense could either be a smart decision or a poor one. That’s because once you claim that home office, it doesn’t count as part of your private residence anymore. When you sell your house sometime down the line, you’ll either make a profit or a loss. If you make a profit, the value of your home office will be taxed as a capital gain, at a maximum rate of 25%, costing you money. If you make a loss selling your home, you can deduct the value of the home office as a loss, making you money.

How the math works out for your depends on your situation, so it’s smart to talk to your tax preparer before you deduct your home office.

If You Paid Closing Costs …

Any origination fees that you paid your mortgage lender at closing are deductible, even if your lender paid the closing costs. You can find the exact figures on your HUD-1 settlement statement, which you received from your escrow provider or title attorney at or just after closing. If you can’t seem to find it, contact your real estate agent or mortgage broker to request it.

If You Paid Property Taxes …  (Hint: You Probably Did)

Like we explained above, usually your property taxes are paid to your lender as part of your loan. But if you bought your house this year, you probably paid your fair share of the property taxes upfront. You can find out how much you paid on your settlement documents, and deduct it.

If You Paid Mortgage Discount Points …

When you pay a “point” toward your mortgage, that means you paid the equivalent of 1 percentage point of your loan upfront at closing in order to get a lower interest rate. This doesn’t go to pay off your loan, but it can save you money in the long run, which is why people do it. If you paid mortgage points, you can deduct them if:

• The loan is secured by your primary residence
• The loan was used to buy, improve or build the home
• Paying points is a common practice in the geographic area of your new home
• The points are calculated as a percentage of the loan principal
• The points are clearly outlined on the buyer’s settlement statement, and
• The amount of cash you put into the purchase of your home (including down payment, closing costs, etc.) is at least equal to the amount you were charged for the points you paid on the loan

If you paid points to refinance your home instead of buying or improving your home, you deduct a portion of what you paid each year, spread out over the life of the loan. For example, if you paid 1,000 in points to refinance a 10-year loan, then you could deduct $100 each year.

If You Took Out a Personal Home Equity Loan …

What if you took out a home equity loan to pay for something other than your home, like tuition or home improvements? Well, it depends. Part or all of the interest you pay on that loan could be deductible for up to $100,000, or $50,000 if you are married filing separately. Here’s how the math works when it comes to tuition:

Let’s say your home is worth $200,000. You currently have a mortgage worth $150,000. So your home is worth $50,000 more than the mortgage. If you take out a home equity loan to pay for tuition, then you can only deduct the interest on $50,000 of that loan. That number would be the same whether you took a loan out for $60,000 or $200,000—you can only deduct interest on $50,000 of that loan.

If you find yourself getting hit with the alternative minimum tax (AMT), then you cannot deduct any portion of the interest on a home equity loan when calculating AMT.

However, if you used that $60,000 loan to build a shed and install a pool, you can deduct all of the interest whether or not you fall under the AMT. That’s because you used the loan to improve your property.

If You Made a Profit on Your Home …

If you sold your house for more than you paid, you technically made what is called a “capital gain.” Usually capital gains are taxed, but the gain you made on your home—up to $250,000 ($500,00 for married couples filing jointly)—is exempt from income taxes. You just need to have:

• Owned the property for two years, and
• Lived in it for two out of the last five years before you sold it

If you don’t meet these requirements, all is not lost. If you had to sell your home because of:

• Death
• Divorce or legal separation
• Job loss that qualifies for unemployment compensation
• Employment changes that made it difficult for you to meet mortgage and basic living expenses
• Multiple births from the same pregnancy
• Damage from a natural or man-made disaster
• “Involuntary conversion” by a local government under eminent domain law, for example

Then the IRS will cut you some slack and only tax your gain partially. Learn more at the IRS website.

Also, if the gain you made is more than $250,000 (or $500,000 if you’re married filing jointly), dig around and see if you can find the receipts for any home improvements you made. That will establish the cost basis for the home as higher. For example, if you bought your home for $300,000 and made $50,000 in improvements, then sold it for $600,000, you can deduct that entire amount ($600,000-$350,000 = $250,000). If you hadn’t included those improvements, you would have been taxed on that extra $50,000 that exceeded the limit.

This post originally appeared on LearnVest.com on Feb. 15, 2012 and was written by Alden Vick

Disclaimer: This information is taken from an original post on LearnVest.com and the author of this BLOG is not offering legal advice and is meant as educational information to possible tax exemptions available and All tax payers should consult with a professional tax consultant or financial advisor in regards to any tax questions.