January 20, 2010 SHORT SALE KICKBACKS http://www.cnbc.com/id/15840232?video=1386877150&play=1 January 7, 2010 STILL HUNTING FOR A BOTTOM IN HOUSING The decimated housing market may get considerably worse before it gets better, according to housing industry professionals, who expect foreclosures and home price declines to continue pressuring the sector through at least the first half of 2010. The biggest problem will likely be a flood of inventory hitting the market from rising foreclosures, says Bob Curran, a managing director at Fitch Ratings. With a mountain of specialized adjustable rate mortgages, known as option ARMs and ALT-A mortgages, slated to reset over the next 12 to 18 months and unemployment projected to hit 10.5% this year, the number of homeowners defaulting on their mortgages is expected to surge. At least $64 billion in option ARMS will reset in 2010 and another $68 billion in 2011, according to First American CoreLogic, a real estate and mortgage data company. (See article: "High End Homes That Won't Sell".) At the same time, the government's loan modification program has been disappointing: The default rate on loans modified after the third quarter of 2008 was 61%, according to a report issued in December by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. All of this is expected to trigger another wave of potential home foreclosures in 2010 and could cause home prices to fall another 5% to 10% before the market stabilizes, according to analysts and economists. A record 3 million homes received foreclosure notices in 2009, according to Lawrence Yun, chief economist with the National Association of Realtors. He expects a similar number this year. John Burns, president of John Burns Real Estate Consulting, is a bit more bearish, predicting foreclosure notices will rise to 3.1 million this year. Foreclosure notices include default notices, auction sale letters and bank repossession notices. But those notices may produce a far more damaging result than last year. "I think 50% more people will lose their homes to a bank this year than they did last year," predicts Burns. One reason for the expected jump, he says, is that in 2009 many lenders were under pressure from the Obama Administration to postpone repossessions until loan modifications could be done. However, many banks didn't have the staff to assess all their defaulted loans at the time, and he believes many of those will ultimately go into foreclosure in 2010. (See 10 things to buy during the recession.) Adding to the sector's woes — the Federal Reserve has indicated it plans to end a program that's helped to keep mortgage rates at attractive levels for homebuyers. The Fed program, which involved purchasing up to $1.25 trillion in mortgage-backed securities backed by Fannie and Freddie, will expire on March 31. Rates have already started to inch up in anticipation of the change, with the average 30-year fixed-rate mortgage surpassing the 5% mark in December. Since the housing market's peak in July 2006, home prices have plunged 30% on average, with some markets, such as Las Vegas, Phoenix and parts of Florida, falling more than 60%. NAR's Yun estimates home equity losses from the housing meltdown totaled $7 trillion at the end of 2009. Many housing industry experts believe pricing will bottom soon, but the bears warn it will likely be 2013 before the market noticeably rebounds. "The improvement that we're going to see off the bottom will be anemic" for quite some time, says Curran. "Some markets still have further (down) to go, but we're definitely in the latter innings of the downturn," says David Goldberg, an analyst at UBS. "Even if there's another leg down, we definitely think by (late) 2010 we will have seen the bottom of housing." The government's decision to extend the $8,000 first-time homebuyer tax credit to mid-2010 and expand the program to include a $6,500 credit for non-first-time homebuyers will likely help lure home shoppers into the market. Also, the slide in prices is making homes more affordable. Notes Burns: "If you go to Phoenix, it's $800 a month to buy a brand new house," making it more affordable than renting." There have already been mixed signs of stabilization in price and demand. Home prices rose month-over-month for six consecutive months through October, according to Standard & Poor's Case-Shiller Home Price Composite 10 Index, although prices are still down year-over-year. However, the latest figures from NAR indicate that pending sales of existing homes fell 16% in November. Such mixed signals, analysts say, will be the housing market's message for some months to come.
Read more: http://www.time.com/time/business/article/0,8599,1952132,00.html?artId=1952132?contType=article?chn=bizTech#ixzz0bwa6mEV9
November 16, 2009 NEWLY EXTENDED AND LIBERALIZED HOMBUYER TAX CREDIT RULES On November 6, the President signed into law H.R. 3548, the ''Worker,
Homeownership, and Business Assistance Act of 2009.'' The new law extends
and generally liberalizes the tax credit for first-time homebuyers, making
it a much more flexible tax-saving tool. It also includes some crackdowns
designed to prevent abuse of the credit. These important changes could it
make it easier for you or someone in your family to buy a home. And because
the changes generally aid buyers and aim to improve residential real estate
markets nationwide, they also could make it easier for you or someone in
your family to sell a home. This Client Letter fills you in on the details
you need to know about the first-time homebuyer credit.
Homebuyer credit basics. Before the new law was enacted, the homebuyer
credit was only available for qualifying first-time home purchases after
April 8, 2008, and before December 1, 2009. The top credit for homes bought
in 2009 is $8,000 ($4,000 for a married individual filing separately) or 10%
of the residence's purchase price, whichever is less. Only the purchase of a
main home located in the U.S. qualifies. Vacation homes and rental
properties are not eligible. The homebuyer credit reduces one's tax
liability on a dollar-for-dollar basis, and if the credit is more than the
tax you owe, the difference is paid to you as a tax refund. For homes bought
after Dec. 31, 2008, the homebuyer credit is recaptured (i.e., paid back to
the IRS) if a person disposes of the home (or stops using it as a principal
residence) within 36 months from the date of purchase.
Before the new law, the first-time homebuyer credit phased out for
individual taxpayers with modified adjusted gross income (AGI) between
$75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of
purchase.
Your guide to the revised homebuyer credit. The new law makes four important
changes to the homebuyer credit:
(1) New lease on life for the homebuyer credit. The homebuyer credit is
extended to apply to a principal residence bought before May 1, 2010. The
homebuyer credit also applies to a principal residence bought before July 1,
2010 by a person who enters into a written binding contract before May 1,
2010, to close on the purchase of the principal residence before July 1,
2010. In general, a home is considered bought for credit purposes when the
closing takes place. So the extra two-months (May and June of 2010) helps
buyers who find a home they like but can't close on it before May 1, 2010.
They can go to contract on the home before May 1, 2010, close on it before
July 1, 2010, and get the homebuyer credit (if they otherwise qualify). Note
that certain service members on qualified official extended duty service
outside of the U.S. get an extra year to buy a qualifying home and get the
credit; they also can avoid the recapture rules under certain circumstances.
(2) The homebuyer credit may be claimed by existing homeowners who are
“long-time residents.” For purchases after November 6, 2009, you can claim
the homebuyer credit if you (and, if married, your spouse) maintained the
same principal residence for any 5-consecutive year period during the
8-years ending on the date that you buy the subsequent principal residence.
For example, if you and your spouse are empty nesters who have lived in your
suburban home for the past ten years, you are potentially eligible for the
credit if you “move down” and buy a smaller townhome. There's no requirement
for your current home to be sold in order to qualify for a homebuyer credit
on the replacement principal residence. Thus, the replacement residence can
be bought to beat the new deadlines (explained above) before the old home is
sold. For that matter, you can hold on to your prior principal residence in
the hope of achieving a better selling price later on.
The maximum allowable homebuyer credit for qualifying existing homeowners is
$6,500 ($3,250 for a married individual filing separately), or 10% of the
purchase price of the subsequent principal residence, whichever is less.
(3) The homebuyer credit is available to higher income taxpayers. For
purchases after November 6, 2009, the homebuyer credit phases out over much
higher modified AGI levels, making the credit available to a much bigger
pool of buyers. For individuals, the phaseout range is between $125,000 and
$145,000, and for those filing a joint return, it's between $225,000 and
$245,000.
(4) There's a new home-price limit for the homebuyer credit. For purchases
after Nov. 6, 2009, the homebuyer credit cannot be claimed for a home if its
purchase price exceeds $800,000. It's important to note that there is no
phaseout mechanism. A purchase price that exceeds the $800,000 threshold by
even a single dollar will cause the loss of the entire credit.
The new purchase price limitation applies whether you are buying a
first-time principal residence or are a qualifying existing homeowner
purchasing a replacement principal residence.
Other homebuyer credit changes. The new law includes a number of new
anti-abuse rules to prevent taxpayers from claiming the homebuyer credit
even though they don't qualify for it. The most important of these are as
follows:
.... Beginning with the 2010 tax return, the homebuyer credit can't be
claimed unless the taxpayer attaches to the return a properly executed copy
of the settlement statement used to complete the purchase of the qualifying
residence.
.... For purchases after Nov. 6, 2009, the homebuyer credit can't be claimed
unless the taxpayer has attained 18 years of age as of the date of purchase
(a married person is treated as meeting the age requirement if he or his
spouse meets the age requirement).
.... For purchases after Nov. 6, 2009, the homebuyer credit can't be claimed
by a taxpayer if he can be claimed as a dependent by another taxpayer for
the tax year of purchase. It also can't be claimed for a home bought from a
person related to the buyer or the spouse of the buyer, if married.
.... Beginning with 2009 returns, the new law makes it easier for the IRS to
go after questionable homebuyer credit claims without initiating a
full-scale audit.
What hasn't changed. The tax law still gives you the extraordinary
opportunity to get your hands on homebuyer credit cash without waiting to
file your tax return for the year in which you buy the qualifying principal
residence. Thus, if you buy a qualifying principal residence in 2009 you can
treat the purchase as having taken place this past December 31, file an
amended return for 2008 claiming the credit for that year, and get your
homebuyer credit cash relatively quickly via a tax refund. Similarly, you
can treat a qualifying principal residence bought in 2010 (before the new
deadlines) as having taken place on December 31, 2009, and file an original
or amended return for 2009 claiming the credit for that year.
What also hasn't changed is the need for getting expert tax advice in
negotiating through the twists and turns of the new beefed-up homebuyer
credit. Please call us today for details on how the homebuyer credit can
help you or your family members.
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© 2009 Thomson Reuters/RIA. All rights reserved.
This is a great time to purchase real estate in Florida. Please contact an attorney at Khani & Auerbach to learn how we can assist you with the purchase of your new home or the refinance of an existing residence. Please contact an attorney at Khani & Auerbach to learn how we can assist you with the purchase of your new home or the refinance of an existing residence. |
