Capital Gains Tax Going Up in 2011

April 15th is now upon us and soon disappearing, but for those who need to consider their capital gains, there is a window until January 1, 2011 before the 20% capital gains tax returns, after an 8-year hiatus at the 15% level.

If you have owned an investment property for more than one year, you could be subject to the long term capital gains tax, and beginning in 2013, an additional 3.8% tax on certain investment income which is subject to income tax, including capital gains, for those in higher income brackets, will also apply.

Investment property owners often consider a 1031 exchange as one method to avoid these capital gains taxes, evening combining several properties they no longer want to manage into one new property. There are certain rules and timelines governing these exchanges which must be complied with in order to obtain the IRS tax deferment.

Although California's February 2010 median sales price of a single family home has risen by over 14% from February 2009, you should find out the market activity in the immediate area of your property, because all real estate is local.  The trend could be up or down nationally, or statewide, but find out comparable prices of similar properties within the last 3 months and within one mile or less of your property.  And, even though the prices may continue upward for you, will that help you if the property has to be taxed at 20% capital gains after January 1, 2011?

For a standard chart to calculate your basis, and gain, at the 15% rate and then compare to the 20% rate, and then analyzing with and without a 1031 tax exchange, contact me. You will need certain information to make a reasonably accurate estimate, and of course, you should consult your tax advisor for specific financial calculations for your circumstances. For doing a sale and 1031 exchange, however, you will want to use a real estate professional who will provide the necessary disclosures and ability to handle the real estate transaction, and an extremely reliable and qualified intermediary for the exchange portion of the sale.

For basic information concerning exchanges, go to http://www.juliahuntsman.com/1031_Exchanges.html.

California $10,000 Buyer Tax Credit Is Coming Very Soon!

Some of you may not yet know about the $10,000 California tax credit which will go into effect on May 1, 2010, until the end of the year, or until the funds run out. $200,000 million total is allocated--half to new construction purchases and half to an existing home purchased by a first time homebuyer. Purchasers must reside in the home for two years, and there are no income limitations to be met, and no repayment as long as the purchaser stays in the home for two years. The status of funds available (there's no guarantee how long this money will last) will be published at http://www.ftb.ca.gov/.  Note: May 6 update article.

The credit is either $10,000 or 5 percent of the purchase price, whichever is less. So if a $500,000 home is purchased, the buyer would receive the $10,000 credit, which would be payable in equal amounts over 3 years.

The homeowner submits a certificate to the FTB after entering into a purchase contract.

Buyers who are not taking advantage of the IRS tax credit, ending April 30th, have this second opportunity given by the State of California.

In case you need more of a picture of how things are working in the buyer's favor, please see the interest rate histories at http://www.housingmatrix.com/index.php/interest-rate-histories.html where the viewer may look at the 30-year history, 10 years, etc.

Current interest rates (which are moving up right now) are still close to the range of where rates were in the late 1960's and early 1970's, unlike the high peak during the early 1980's when rates were in the 18-20% range. However, a snapshot of last week shows rates moving above 5% when they have been below 5% much of the last year for 30-year fixed mortgages. So for a $400,000 loan amount, the monthly principal and interest payment at 5% would increase by $61.00 a month if the rate goes up to 5.25%, or $732.00 annually.

For a customized list of homes, please contact me, very easy to send via e-mail. For February's trends in Long Beach, see my earlier post on trends in condos and houses, and the inventory.

For a similar report on your immediate neighborhood or zip code, contact me via phone or e-mail. I can easily send you one by e-mail.
For a current property search, go to http://www.juliahuntsman.com/ for condos, houses, income property and other MLS listings. And, join my fan page (see column to the right) to keep up with information and important tips!

National Open House Weekend, April 10-11

While this weekend will be noted by many as Long Beach Grand Prix weekend (oops, it's next weekend!), an honored tradition here in Long Beach since the 1970's, others will take the opportunity to visit an open house. The upcoming weekend is the first ever REALTOR® Nationwide Open House Weekend which will be held April 10–11.

Yes, there is such a thing as good behavior at an open house! An open house is an event held inviting the public onto a seller's private property to find an interested buyer.


Don't be afraid to speak to the agent holding open the house! But please know that it is VERY IMPORTANT to state immediately if you are already working with another agent. Let the open house agent know so they can adjust their conversation accordingly, and prevent any misunderstandings. Also, if you're not working with an agent yet, this may be a good time to meet and consider someone.

While interaction is good, be respectful of the agent’s time who is hosting the open house and don’t monopolize their time. If nobody else is there, please, feel free to stay and chat all you want, in fact, that's a great way to meet a Realtor and learn about the local market. But if the open house is attended by many people, please know that the agent will want to greet all of the open house guests and be sure they are available to answer questions. Should you wish to, let the open house agent know you would like to schedule another time for a more indepth conversation.

Please keep an eye on your entire family – if it’s just you or a party of adults – go in and have fun. If you have small children with you – please keep them with you (even hold the child's hand) at all times.

Don't eat or bring food or drink into someone’s home unless it’s provided there as a refreshment, and please, do not use the bathroom facilities.

Treat the home as you would want yours treated, and wipe your feet before going in. Dusty bare feet are likewise not advisable.

Every one is entitled to an opinion, but while inside please refrain from making "put-down" remarks about the home you are visiting.

Sign the guest register. If you’re working with an agent, please make that notation – even write their name down if you don't have their business card with you. If you’re not, but you do NOT want to be contacted, just indicate so – but please sign in. It helps us let the seller know how many people attended, and to know what advertising works and what doesn’t. if you saw the advertisement online, say so. If you just followed the directional signs, please mark that, but it helps sellers and their agents (and someday that could be you) to know the best marketing for their properties.

If you’d like a list of homes in an area of interest, please call (or e-mail) me.  Julia Huntsman, Broker, Lic 01188996.

(Thanks to Jennifer Klaussen in Arlington, VA for the inspiration for this post.)

Condos vs. Houses: How's it Going?

There it is, all in one picture: a condo building and two large homes, side-by-side, each property owner choosing where to live for individual reasons. And among those reasons would most certainly be affordability, but then even if a condo buyer could include the market value of either of the two houses in his price consideration, would he or she, looking down from a condo window, still want to buy the house with the large lot, square footage, maintenance, and property taxes? (The former owner of the house on the right once told me that he did make such a choice will standing in an upper floor condo next door.) These particular properties happen to be at two extremes of size and value (the condos are in the $500,000 range and the houses are double and triple that), but many people will ultimately prefer a house over a condo if they can also choose other adjustments in their criteria.

Nationally, condo inventories are higher than houses, but according to the National Association of Realtors, "the condo market has actually outperformed the single family market recently. In February, condo sales were up 30.3 percent YOY in comparison to 4.3 percent for single family homes. Starting in July of 2009 condo sales have been running at rates higher than the total for either 2008 or 2009."

In Long Beach, the months supply of inventory ending in February 2010 for single family homes is 3 months (down 44% from last year: 1045 vs. 1290 in 2/09), while the months supply of inventory for condos and lofts is 3.75 months (down 46% from last year: 449 condos on the market vs. 592 in 2/09).

Long Beach condos in escrow were up by 42% from 2/09; the number of houses in escrow were up by 30% from 2/09. The median sold price for houses in Long Beach, however, has increased from $310,000 to $350,000, while the median price for condos has decreased from $237,000 to $203,000. (These trends may vary somewhat by specific areas.) Days on market has decreased for both, but overall condos are spending less time than houses on the market.

Historically, in the local market, condos are the first time buyer's most likely choice due to price, and yet because of the distressed market many of those borrowers are having trouble, and condos are the likely choice of many investors and all cash buyers as prices make them more and more attractive.

Although March's figures are not available yet, more inventory in both categories has been coming on the market locally, and the California tax credit as well as what's left of the federal tax credit are helping to spur more action.

Stay tuned.

Short Sale Sellers and Sellers with 2nds, Take Heed

Some sellers of short sale properties could be feeling the impact well into the future. Some lenders have been selling unpaid second mortgages and home equity lines to collection agencies, to later go after the borrowers with repayment plans. Many of these are part of the "80/20" zero down loans, where the second was a huge chunk of the original equity, and now could very well be gone as a $500,000 house value has shrunk to $400,000. A seller should obtain a written release of full satisfaction when short pay approval has been granted, which a knowledgeable negotiator, whether it's your Realtor or another licensed individual, can obtain. California has certain protections already concerning purchase money mortgages, however, second liens may be a future problem.

But, even if you did sell short sale and obtained release and satisfaction, every seller of a short sale should now know that California has previously followed federal law concerning the Mortgage Debt Relief, but this year that relief is threatened due to certain unrelated provisions in a tax bill currently under consideration which Gov. Schwarzeneggar has said he will veto, thereby eliminating tax protections for those whose properties were "underwater" in a short sale. If this bill is not signed, short sale sellers will be on the hook for their California tax for a short sale come April 15th. This is the time to contact your California legislative representatives.

Yet another California Senate Bill 1178 (Corbin), if passed, would protect holders of second mortgages who refinance and stay in their homes, against future collections by banks which could be attempting to regain their lost funds. And, a new Obama Administration program which takes effect on April 5th also aims to protect owners with second mortgages by requiring lenders to send notice to short sale borrowers that partial sale proceeds were used in full satisfaction to pay off the second lien holders. This release, however, only applies to sales conducted under the Home Affordable Foreclosure Alternatives program, or HAFA, the program taking effect April 5th. It is complex and lengthy, demonstrated by the 43 pages in the link, and servicers participating can be found at this HAFA participant servicers link. A HAFA short sales fact sheet outlines the basics.

Home Buyer's Fair, a Southern California Consumer Opportunity!

This weekend is the time to use your free time for your future advantage! Attend the free 3rd Annual Homebuyer Fair this weekend, March 13th and 14th at the Los Angeles Convention Center, sponsored by the Los Angeles Times and the CALIFORNIA ASSOCIATION OF REALTORS®. With more than 50 educational seminars and 65 booths, there will be many many opportunities to learn about navigating the home purchase process and the market.

This is for all buyers--first timers and investors alike, as well as homeowners, so the attendee will find information on home insurance, buying foreclosures and short sales, how to plan for your first purchase, finding a Realtor and finding a mortgage lender, how to negotiate your loan modification, and tax credits. Many seminars are also presented in Spanish.

See seminars at http://www.homebuyersfair.com/seminars and general information, including parking ($12) at http://www.homebuyersfair.com.

See exhibitors at http://www.homebuyersfair.com/exhibitors
Find me at Pacific West Association of Realtors Saturday afternoon after 2 pm!

Dear Buyer, Are You Ready to Own?

Dear Buyer,

Many of us have heard all our lives that owning your own home is the American Dream, and that's what our goal should be. To be sure, we (still--but you might have to fight to keep them, see person to the right) have our tax deductions on mortgage interest and property taxes, among other things, so there are ways we are helped when owning property. And, to be sure, many people are paying more in rent, or nearly so, than they would be in after tax savings on a mortgage.

But there's another factor the first time buyer should consider strongly: Are you really ready to own? Because the truth is, there are certain responsibilities that come with ownership, and you will benefit greatly by thinking of these in advance, before you start going to open houses and getting excited, before you talk to anyone about buying anything.

Do you have a budget? Are you used to living under a financial plan, if not on paper, at least in your head? All the loan disclosures and property disclosures on earth will not help you if you are not prepared for life after you close escrow.

Create a long-term budget to help estimate all the costs of homeownership. Items such as property taxes (estimate at 1.25% of your current California sales price), your personal insurance, utilities, closing costs, appraisal fees, escrow fees, homeowner association dues, other home maintenance costs (roof, painting, plumbing), homeowner’s insurance fees, and moving costs should be included in the budget. Have you really estimated what you might have left over at the end of the month after your usual monthly expenses, and, assuming your lender qualified you for it, are you comfortable with that? And, besides financial ability and readiness, there is what I call "emotional readiness": the desire to own and the willingness to handle the commitment to ownership.

You will probably be better able to outlast temporary short term financial challenges if you have given some time and preparation towards the above, plus other homebuyer education with your Realtor. By doing so, I predict you will find both the home search process (another topic) and the entire buying process a better experience overall.

You may find a helpful free site at HouseLogic.com, where you can explore all these issues and more. This site is for both new buyers and current property owners to help estimate costs, explain maintenance and insurance issues and home improvement programs, types of financing, budgeting, costs, market trends, tax deductions and tax incentives, and much more!

Love, Your Realtor

P.S. There are many free online budget programs, or if you would like one of mine, I would be happy to e-mail it to you (this offer is open to anyone).

Is This the Shift in the Down Cycle?

After three years of shrinking equity and, at the same time, the expansion of the number of homeowners underwater in home value, the Federal Reserve economists, who conduct "massive research" into mortgage balances and home value changes, have some better news. According to their "flow of funds" survey, "homeowners' net equity grew by nearly $1 trillion" from 1st through 3rd quarter of 2009, and in the 3rd quarter of 2009, net equity increased by $418 billion. The down cycle could be shifting, per this article in the Washington Post (see link).

According to Zillow, the percentage of homeowners with negative equity is on the decline in many housing markets including Los Angeles. Riverside, heavily impacted by foreclosures, also saw improvement.

The median Southern California price for houses and condos in January, per Dataquick, was $271,500, up 8.6% from one year earlier, and buyers who paid all cash accounted for almost 29% of January sales, the highest such figure since 1988. FHA loans accounted for almost 37% of all home purchases. Loans over $417,000 accounted for only 14% of all home loans in January.

In Long Beach, probably thanks to the first time buyer tax credit (which expires in April), and to growing recognition that current prices are the best real estate opportunity in years, properties in escrow (up 36%) and median sales price (up 6%) have both risen overall in the period since one year ago.

Is Purchasing a Probate Property a Good Way to Buy?

This article by Online Ed makes some good points:

Why is Probate sometimes a good way to find property? The probate process involves the creation of an inventory of all assets of an estate, followed by the distribution of assets necessary to pay off all remaining debts the estate may owe. Often times the heirs to an estate will have to liquidate some of these assets in order to satisfy the debts and liabilities of the estate. Houses are frequently the largest repository of value in an estate and often need to be liquidated in order to settle the estate.

Even if the home doesn't need to be sold to cover liabilities, the heirs will frequently sell the property in order to distribute the proceeds to multiple individuals. If the property needs maintenance or repair before it can sold at fair market value, that usually means someone is going to have to invest time and money to make those repairs themselves or hire someone else to do so. All too often, it takes family members more time and money than was ever anticipated. If the heirs live some distance away, or in another part of the country, the process of renovating and preparing a house for sale becomes even more demanding. Faced with those options and the potential windfall of cash from an immediate sale, most people will opt to sell – and will be willing to do so at a substantial discount. Remember, holding on to a vacant house in order to realize a bit more profit is not without cost or risks. There’s insurance, utilities, yard maintenance, and the ever-present risk of break-in or vandalism.

In addition, the heirs to the estate may be willing to finance the property with very favorable terms in order to make the deal work. This is especially true if the property has no mortgage and is owned free and clear.

In Long Beach, since 2009, out of all 1-4 unit residential properties, there are currently a total of 74 properties in the probate category that are active, in escrow, or sold, in the SoCalMLS. Considering that since 1/1/2009, in the same 1-4 unit category, there were 3505 properties sold in Long Beach, per the MLS, the probate properties are thus a small category of property. But then why should the buyer be concerned about these? Because it may pay to be prepared, just as it pays to be prepared for a short sale, an REO bid, a property under a timeline because it has a notice of default on it and may soon go into bankruptcy, and other categories which may require court approval, or even auction.

And, in some areas, it may be best to assume that a strong market price will be negotiated (many heirs study area sales too) , but the opportunity for the buyer may be that other buyers may choose to not buy a fixer, or take an as-is sale with no repairs by the seller.

It pays to know what you the buyer might be capable of doing in this market.

Another First for Buying: California Mortgage Protection Program

It's so hard to not be helped right now, especially if you're a first time buyer. On top of the $8000 tax credit available right now, California Association of Realtors is also offering a mortgage protection program. More security can be yours if you fit the bill:

Did you know? Through the California Association of Realtors' Housing Affordability Fund qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage. This program began in April of 2009 and continues through the end of 2010. Another great program for first time buyers that adds additional security to their home buying experience! So if you, or someone you know is, are a first time buyer, this program will last until the funds are depleted, or 12/31/2010. This program actually began in April, 2009, and will last until the end of this year, or until funds have been depleted prior to that time. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months.

TO QUALIFY FOR THE MORTGAGE PROTECTION PROGRAM APPLICANTS MUST:

• Be a first-time home buyer or co-buyer – someone who has not owned property in the last three years
• Open escrow April 2, 2009, or later, and close on or before December 31, 2010 .
• Use a California REALTOR® in the transaction (fee for referral does not qualify) ·
• Purchase the property in California
• Be a W-2 employee (cannot be self-employed)

Applications are available--don't miss this opportunity for another benefit of buying at this time.

http://www.juliahuntsman.com/ for a property search, information on buying residential property.