Benefits of the New (and Extended) Tax Laws for 2013

Much has been written about the last-minute passage of the "fiscal cliff" issues by the federal government.  But, remember there are state level issues as well, some of which are still being worked on in California., specifically SB 30.

In 2007, the new law provided, for five years, incentives for sellers to accept short sales by, in many instances, forgiving taxes that would have been due for the forgiven debt amount.

Previously, when a lender forgave a portion of borrower debt, the forgiven amount was, in many instances, considered taxable income for the borrower.

This tax incentive for sellers to participate in short sales was just extended by Congress for another year, expiring January 1, 2014; however, California's exemption under the Mortgage Forgiveness Debt Relief Act expired at the end of 2012, and currently forgiven mortgage debt is taxable state income.  SB 30 (Calderon) has been introduced, and if and when passed by the California legislature, it will make California conform to federal law, and will be retroactive to January 1, 2013.

Not all debt is forgiven in every instance. Sellers should check with their tax consultant for exceptions. For example: Maximum amount that can be forgiven is $2,000,000. To be forgiven, the debt must have been used to buy, build or substantially improve their principal residence

Other housing-related provisions brought into effect with the new laws are:

• A 10% tax credit up to $500 for homeowners' energy improvements to an existing home, and is retroactive for 2012.
• Capital gains rates remain at 15% for incomes under $400,000 (individual) and $450,000 (joint); above those income levels gains will be taxed at 20%.  On sale of principal residence, the gains rate remains at $250,000 (individual) and $500,000 (joint).
• An 2011 expired tax deduction for mortgage insurance premiums (MIP and PMI on loans) has been restored and is retroactive through 2012.
• The new "Pease Limitations", per California Association of Realtors, are at "$300,000 for married taxpayers filing jointly and $250,000 for single taxpayers (i.e., a married couple with an AGI of $400,000 would be $100,000 over the threshold; the couple’s deductions would be reduced by $3,000 which is 3% of $100,000). No matter how high a taxpayer's AGI, the Pease reduction cannot exceed 20 percent of the amount of itemized deductions otherwise allowable for the year." These were named after Ohio Congressman Don Pease and were first enacted in 1990.
• The first $5 million dollars in individual estates and $10 million for family estates are now exempt from the estate tax. After that, the rate will be 40%, up from 35%. The exemption amounts are indexed for inflation.
• More at http://www.toptennewhomecommunities.com/blog/fiscal-cliff-bill-addresses-some-key-housing-issues/

Summary for Recent Real Estate Trends at end of 2012

Happy New Year for 2013 -- there are positive signs in the housing market, and we hope that they will continue!

Pending home sales continue to rise (Pending means those in escrow, scheduled to close), as shown by the Pending Homes Sales Index which rose nationally by 1.7%, and is at the highest level in the last two-and-one-half years.  Pending homes sales have risen consecutively for the last 19 months.
The November median price for a single family home in the Los Angeles Metropolitan Area rose to $327,840 from $269,440 in November, 2011!  The share of distressed sales (mostly REOs and short sales) for single family homes in the Los Angeles area has decreased to 35% from 46% one year ago.

The market is not determined just by whether the prices go up or down, there are a lot of other factors, including whether or not sellers are motivated to sell because that in turn depends on other economic factors which create the movement in housing.  Inventory is a big issue right now, no question of it.

How will the "fiscal cliff" measures affect real estate (still not resolved as of this moment)?  An unrenewed date for the Mortgage Debt Relief Act will require homeowners who went through short sales, loan modifications and other resolutions to pay taxes on forgiven debt. And will the mortgage interest tax deduction be reduced or removed? That will affect most homeowners in the country if that happens.

Will borrowers be subjected to new mortgage rules in 2013? The lending environment is already stringent, making it difficult even for some 20% down borrowers, so buyers should be aware if how conventional vs. FHA loan opportunities could work for them in the future. The topic of "qualified mortgage" rules is being examined in the coming year, and the big question is will it mean that all borrower for conventional loans be required to put down a minimum of 20%--that's a tough hill to climb.

There is some good news in the housing market now, but it will need economic support in a variety of ways to keep that going.

If you have a reason to sell, please contact me for a free evaluation of your home's value! Find properties at www.juliahuntsman.com for the latest area listings of all residential properties.

Increase of 24% in November Home Values in California Since 2011

November median prices for home sales in California have increased by double digits compared to one year ago, and the number of sales have also increased on a year-over-year basis as well.

Higher priced homes sold at increased numbers in November, even as sales declined overall in lower-priced areas due to fewer homes available for sale. In the Long Beach/Lakewood/Cerritos area, homes under the $500,000-$450,000 range in particular have sold very fast with multiple bids.  The California statewide median price for a single family detached home increased in November to $349,300, up from October's median of $341,370, an increase of 2.3%.  November's median price was up 24% from the November, 2011, and that is the biggest year-to-year increase since June, 2004!

Additionally, California's inventory for single family homes is down to 3.1 months overall (in some areas such as Riverside County, it's far less), and this is a decrease from 5 months of inventory one year ago.

Interest rates have dipped further to a November average of 3.35% for a fixed-rate 30-year mortgage; and it's taking fewer days to sell a home: an average of 37 days compared to 56 days one year ago.

Long Beach Housing Inventory Graph
 

In Los Angeles County, the median price is $337,000, an increase of 15% from one year ago, with the unsold inventory index at 2.9 months, down from 5.6 months one year ago (that means all existing unsold housing would sell at the current rate of sale within 2.9 months if no new listings come on the market--six months of inventory is more the number we should have.) And, this picture on inventory is not unique to Long Beach, it is typical of the local cities, county, state and national status of housing inventory.

As a side note, appraisals and buyer's lender financing issues have not away, which are topics for another post.
With the increase in prices, more homes are getting a little more equity--to find out what your values could possibly be, please find out your home's value from current and complete information directly from our Realtor MLS and tax inventory.  Even if you have no intention of selling in the near future, you may need market information about your property for a variety of reasons, such as re-financing, planning an estate, or just for your own information.

P.S. For a little Christmas spirit, see my photos of a few decorated houses at www.facebook.com/longbeachhomesandcondos -- and "like" me too.

Open House - Alamitos Heights - Expansive Mid-Century

Open house today on fantastic remodeled mid-century style home. Dec. 16, 2012 noon-4 pm.

Take a break from Christmas shopping and stop by to see an amazing home! 5 bedrooms, 4.5 baths, pool.



795 Los Altos Ave., in the Long Beach neighborhood of Alamitos Heights.

See more open house information.

Julia Huntsman, Broker
01188996

The Fiscal Cliff - or Tax Breaks That Could Be Gone

At the end of 2012, depending on what happens between the political parties, there could be many expiring tax provisions that originated in the George W. Bush Administration, when 2012 was the sunset year for so many breaks.

Federal income tax rates are scheduled to increase in 2013, with tax brackets currently spread from 10%-35% changing to 15%-39.6%. Long term capital gains will increase from 15% to 20%, and other long term capital gains tax rates which apply to qualifying dividends will be taxed as ordinary income.

The 2% reduction in the payroll tax  for Social Security will expire, something which concerns many businesses.

Estate taxes will return to 2001 and the $1,000,000 exclusion for taxes, and the top tax rate increases from 35% to 55%.  (In 2001, there weren't nearly as many $1,000,000 properties to inherit as there are now.)

Earned income tax credits, child tax crfedit and the Hope tax credit will revert to lower limits.

Student loan interest will no longer be deductable after the first 60 months of repayment.

Have you been affected by the Alternative Minimum Tax? the exemption amounts will be lowered, affecting many more individuals (a tax that was only supposed to affect the highest income earners has been affecting more and more of the middle class).

Will tax rates for income earners under $200,000 or $250,000 (households) annually change, or will the tax rates for the vast majority of Americans be impacted as well?

And, once again, there are issues about the "debt ceiling", and what measures may have to be enacted in order to allow the government to meet its obligations.

The Mortgage Debt Relief Act is also set to expire; this act is what allows short sale sellers and individuals who took out a mortgage in a certain time period and were foreclosed on under certain conditions to not be taxed on the forgiven or cancelled debt. Should this Act not be extended, the tax burden of many distressed sellers will be increased.

And, last but not least, there is the issue of whether the mortgage interest deduction will continue and in what form--In California 89% of those who took the mortgage interest deduction earned less than $200,000. Losing the deduction would cost the average California taxpayer over $3,900.

Are you concerned? I hope you are and that you contact your Congressional representative to express your opinion.

www.juliahuntsman.com
www.longbeachrealestate.blogspot.com
www.facebook.com/longbeachhomesandcondos

December Events Around Long Beach Area

Local events and happendings in the Long Beach/Lakewood area, and some are tonight!


Las Posadas Procession and Fiesta at Rancho Los Alamitos on December 16.

See events at Rancho Los Cerritos for Christmas Festival and Tour -
Old Time Christmas Festival, 1-4 p.m., Sunday, December 9; 
Saturday & Sunday, December 15-16: Christmas Candlelight Tours, 5:30-7:30 p.m.

Long Beach Airport will open up a brand new concourse and terminal soon! See gallery photos and article.  See article about original mosaics recently found in the original terminal which were part of the WPA's projects.

Parade of 1,000 Lights, 5:30 to 7:30 p.m. , Saturday, Dec 8, boat parade between Shoreline Marina and Rainbow Harbor.

The Christmas Tree Lane Parade will take place from 5 to 7 p.m. Saturday, Dec. 8, on Daisy Avenue between Burnett Street and Pacific Coast Highway, Long Beach.

Naples Boat Parade, Sat. Dec. 15th, 6 p.m.,  off Naples Plaza and Marine Stadium.

See photos for the Victorian Christmas at the Banning House in Wilmington.

Huntington Harbour Board Parade, Dec. 8, 5:15 p.m., off Pacific Coast Highway, Huntington Beach.

New Real Estate Laws for 2013

California new real estate laws are coming up effective January 1, 2013, and here are a few:

For transactions in homeowner associations, documents are ordered in escrow to go to the buyer, for which there are typically fees charged for the preparation of these documents.  A homeowner association cannot collect a cancellation fee for sales disclosure documents (1) when a written cancellation by the party ordering documents is received by the HOA before work is performed; and (2) when a written cancellation by the party ordering documents and HOA was compensated for any work performed--the HOA must refund all fees collected if a request is cancelled in writing and work had not yet been performed on the order.

Hazard Disclosures: Sellers must now disclose the location of gas and hazardous liquid pipelines, from information in a database.  This information would most likely be coming through hazard disclosure companies hired by the seller in escrow to make these and other disclosures.

Property owners will continue to have anti-deficiency protection on refinanced loans on their property, except for a refinance where cash is taken out. 

Month-to-month tenants of properties in foreclosure must be given 90-day notice to vacate after foreclosure--in six languages (after March, 2013, and there are 4 exceptions to this).  Lease tenants may remain until end of lease term under all terms of the agreement.

Helping Distressed Homeowners Keep Their Homes -- No dual tracking, meaning no sale of property if an alternate foreclosure prevention method has been approved in writing by all parties (investors, lienholders and mortgage insurers).  See my previous post .

Vacant REO properties must be maintained (an existing law which has not been extended indefinitely).

Foreclosure notices must have a summary of information accompanying them, in six languages.

Property taxes -- the death of a co-tenant will not trigger a reassessment of the property, providing certain conditions are met.

Buyers of foreclosed properties have opportunity to correct substandard conditions of at least 60 days before an enforcement agency can take further action.

If you would like the specific legal descriptions of any of these laws, please contact me with your e-mail and name information, I will be happy to forward you additional information!

What is For Sale Under $300,000 in Long Beach?

MLS R1205418 - Click to see listing

Periodically (maybe once a year) I've been tracking this price range about affordable properties in Long Beach. 
One thing to know since my last post on this subject in May, 2012:  The market has changed, and for more than one reason.  Not only are prices going up in some areas, but at the same time there is far less inventory than even just a few months ago. 

Currently, in the MLS, the total number of active listings for $300,000 or less for single family homes, condominiums, lofts, own-your-owns, and coops comes to the grand total of 167 as of this date.  Compare that to 618 properties in May of 2011.

 

The breakdown is as follows:

• Single family homes (some of which homeowner association listings in PUDs) comprise 62;
• There are 80 condominiums listed;
• There are 7 coops (similar to condos but have different property tax arrangements)
• No lofts in this price range;
• There are 18 own-your-owns listed (also similar to condos but different property tax mode)

The number of listings is down due to various market forces, not the least of which is fewer distressed properties on the market. In general, market inventory has decreased by 60-75% since this time last year.  Also, the market prices are actually increasing compared to October of 2011, sometimes by as much as 20% on a month/year to month/year comparison in some zip codes of Long Beach.  See a south Los Angeles County/north Orange County regional report for overall market trends for areas including Lakewood, Cerritos, Huntington Beach, Newport Beach and inland cities including Fullerton.  While the picture may vary individually within each city or zip code, the trends are reported here.

There are even more complex trends within the picture presented here, such as the future of the mortgage debt relief  forgiveness being uncertain which is probably impacting some short sale sellers from putting their property on the market, whether or not there is "shadow inventory" which will be added to the market in 2013 (that's another topic of discussion).

For a property search of these areas go this property search tab, where all types of properties, including 2,3, and 4 units, may be searched throughout Long Beach, Los Angeles County and Orange County and all cities in Southern California. (Currently, all active, backup and pending status listings are shown in this search.)

Are you thinking of selling? Please contact me.

What is a HAFA short sale?

Short sales have not gone away by any means.  Although the number of actual short sales for residential properties has decreased greatly just since the beginning of 2012 in the south Los Angeles County/north Orange County region, the number of homeowners estimated to be in an "underwater" value position is about 25%-30% of the market. A search in today's MLS in the City of Long Beach, out of 492 active residential listings, about 71 are listed under short sale conditions, or about 14% of the active market.  Interestingly, the number of short sales in October 2012 compared to October 2011 has actually increased by 28% overall in the same general region, with short sales being about 6% of the combined market in all the local cities of this local region.

There are, however, reasons for a decline in short sales, one of which is there is still a great number of owners who go into foreclosure without ever attempting to list their home first; next, some do list their home but are unsuccessful in selling before the bank takes it over.  Nationally, more than 7 out of 10 homeowners go into foreclosure without visible intervention.

Currently, there are over 100 lenders participating in the HAFA (the government-subsidized Home Affordable Foreclosure Alternative), including Citimortgage, Bank of America, Wells Fargo, and many servicers.

For a homeowner to participate in this program, there must be certain requirements met--your home must be listed with a local real estate agent, and the necessary documents must be submitted before December 31, 2013, and close by the following September of 2014.  First, it must be a loan other than one by Fannie Mae or Freddie Mac, or insured by FHA, or the VA.  It must be a first trust deed originated before Jan. 1, 2009, and the loan amount for a house or a condo (1 unit) must be under $729,750. The borrower must comply with the specific timelines in this program. The borrower may have more than one property approved for sale under this program, but cannot have purchased a property in the last 12 months..  Last but not least, the borrower must be in a hardship situation.

Now, HAFA will not apply to all borrowers because about 60% of California's mortgages were issued under Fannie Mae, which is excluded from HAFA.  (But Fannie Mae and Freddie Mac also have hardship program, please contact me for information.)  The bank or servicer may not attempt to collect any additional sums (i.e., cash or note) from the borrower after the property is approved for a HAFA sale, and the bank may not complete a foreclosure sale if the borrower complies with the HAFA sale terms.

There's about 9 steps to complete (including close of escrow) to go through a successful HAFA short sale.  What are the pluses? You may have some financial incentives to move under this program, and you may also be able to obtain a release of your second lien. 

Are you being scammed?  See this video here for the 5 basic trouble signs you want to watch out for.

The same banks have their own "cooperative" short sale programs which are similar to the HAFA program; currently Bank of America in particular is doing an outreach to certain borrowers.
For more specific information see Making Home Affordable and a HUD telephone number to call for housing counseling. 

This is a sale which requires the assistance of a real estate professional.  Please contact me for more specific information which can be e-mailed to you about this program.  Please remember you may have other options (do you think you still have equity in your property? that actually happens), and there are other short sale programs being offered right now, some of which offer a great deal of cash incentive to the borrower, so please call me about the HAFA or any other short sale program. Don't let your house go into foreclosure if you can possibly help it.

Julia Huntsman, 562-896-2609

Borrowers are always advised to seek advice from their tax and/or legal professionals.

Eliminating Your Second Lien -- Do Some Checking First

Under a new program by offered by Bank of America for home mortgage second liens, about 150,000 of its borrowers are being contacted to apply for full forgiveness.  Based on the total dollar amount forgiven so far for the number of borrowers, the average is about $69,000. 

If you're currently in a short sale, this could potentially cause a delay, or worse, if you're already on track for closing on the first and time is running as you approach your closing date.  The release time required for completion of the second loan is running about 90 days, so accepting that release will result in a delay of your short sale, or even worse, a loss of that transaction if the investor/servicer on the first will no extend time to close.

Make sure you're really going to get freedom from a difficult mortgage burden.  Say you're not in a short sale, and you receive the offer from Bank of America or one of the other major banks, make sure you get a proper estimate of your home's value from a professional.   If your first loan balance is about $465,000, and your second balance is still around $45,000-$50,000 because you got an 80/10/10 loan (you had 10% down payment, and got a 10% second mortgage) getting your second loan released won't do you any good right now because it will not put you into an equity position--I forgot to mention, you just found out that at best your house is currently worth $450,000 from your neighborhood REALTOR who has checked all the sales within the last 4-6 months in your neighborhood.  If releasing that lien puts you into an equity position, and you're not under a short sale timeline that cannot be extended, then the second lien forgiveness program could be for you.  But make sure you read the entire letter, because if your first is currently in default and on a foreclosure track, getting the second forgiven will not prevent the first's foreclosure. That will still require separate action to stop the foreclosure (there can be different banks and/or different investors on each loan).  Bank of America also makes is very clear that they are choosing who gets invited to this event, you as the borrower cannot pursue it without being invited. (It's not personal, it's just that there are many conditions affecting second mortgage liens.) The fact is, Bank of America took over Countrywide's loans, and Countrywide did a lot of "piggyback" loans, which are probably some of the seconds that are part of this offer. 

It's also wise to review beforehand any possible impact to your credit score (debt cancellation may actually impact your score), reporting to the IRS, and any bankruptcy issues you may have.

If you need an estimate of value on your Long Beach, Cerritos, Lakewood, Seal Beach home, or somewhere near these cities, please contact me.  If you would like more information about a short sale and you're in Long Beach, Cerritos, Lakewood, or in Los Angeles County or Orange County, please contact me.

Julia Huntsman.REALTOR®, CDPE, e-PRO®, SFR, Broker

and don't forget to "like" us at www.facebook.com/longbeachhomesandcondos