What Kind of Stuff are They Saying about Real Estate!!!!

 

 

” Peace cannot be achieved through violence, it can only be Attained through Understanding.”………Ralph Waldo Emerson

 

There is too much misinformation being spread about today’s real estate market. Studies are being misinterpreted. Prominent names are being used to foster a point even if their quote is from years ago.

As an example, we want to look at a story published last week by The Fiscal Times titled The New American Dream: Rent, Don’t Buy. In the article, they claim:

“Call it the Big Selloff—America is headed toward a future in which fewer people own the spaces they call home… Those trends are just the beginning.”

We are not arguing that the homeownership rate is under downward pressure in this country. We are disputing some of the ‘evidence’ used in the article. Here are three points we want to refute:

The Homeownership Rate IS NOT in a Freefall

The article quotes a Morgan Stanley study from July 2011 which did make the argument that the homeownership rate was trending downward. Many others made the same point at that time.  What the article failed to mention is that the homeownership rate unexpectedly increased in the third quarter of 2011! As DSNews reported in early November:

“After falling to a 13-year low during the second quarter, the homeownership rate posted a highly unexpected rise in the third quarter, according to a Census Bureau report.”

The jury is still out as to whether the homeownership rate will continue to fall or whether it has already bottomed out.

The Founders of Case-Shiller ARE NOT Saying Renting is Better

In the article mentioned above, they claim that the team that founded the prestigious Case-Shiller Pricing Index believes that buying makes little sense. The article explains that back in 2006 Robert Shiller presented a study based on data collected prior to 2005 showing that, over time, it made more sense to rent than buy. They use this information to conclude:

 “Another skeptic is Yale economist Robert Shiller, co-creator of the Case-Shiller Home Price Index.”

They claim Shiller is a skeptic today based on what he said six years ago!

The major challenge we have with this is that Karl Case, the other founder of the Case Shiller Index, came out ten days ago saying that now is the time to buy. The New York Times in a story published on 12/30/2011 quotes Professor Case as saying:

“If you’re buying a house or apartment to live in and pay for over time, and can afford the payments, then it’s a terrific time to buy.”

Beracha and Johnson DID NOT Conclude That You Shouldn’t Buy

The Fiscal Times article went on to say:

“And in a paper this June in the journal Real Estate Economics, two researchers calculated that over the past 30 years, most often it would have been better to rent than buy.”

They were referring to a good study done by Beracha and Johnson titled Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise? The paper does explain that over the last thirty years the financial benefits of buying vs. renting could be debated.

However, the conclusion of the paper left no room for argument. According to professors Beracha and Johnson, NOW IS THE TIME TO BUY!

“(F)undamental drivers now appear to be in place that favor homeownership over renting in the near term future…

“[This] might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting.”

They ended their research paper with this sentence:

“Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

Dr. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research, is now a guest blogger on this site and in November shared with us his current presentation on this issue. To download the presentation, go to http://realestate.fiu.edu/buyer-or-renter-nation.html.

 

 

Real Estate and Inflation

“Better to do something imperfectly than to do Nothing at all.”

 

 

 

We haven’t heard a lot about inflation recently.  However, prices have started to creep upward over the last year.  Let’s address the issue of inflation and the advantages of owning real estate.  The National Association of Realtors ( NAR) took a historic look at the impact of inflation.  Here are some inflation numbers over the past 30 years:

                   

We can see that real estate has fared very well.  The most important number is the $0 increase in mortgage amount.  The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.

NAR then looked at inflation moving forward over the next thirty years.  Obviously, if it remained the same as the last thirty years the percentage increase would be the same.  They looked at a low inflation scenario and a high inflation scenario.  The graph below shows the findings:

 

 

 

 

 

 

 

Bottom Line:

We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today.  Either would be a great hedge against future inflation.

 

Captiva Cay….2088 Island Circle Weston, FL 33326

” Every thought we think is creating our Future.”

 

 

 

 

Come by and see this over 2,100 sq. foot home in the desirable Captiva Cay in Weston, FL.  This three bedroom, three full bath  home boasts open airy space.  The master bedroom is on the ground floor.  The two other bedrooms and full bath are on the second floor.  Beautiful landscaping and screened patio in backyard.  Newer roof and electrical fence for your pet.

This home is offered at $329,900.

 

 

 

 

 

 

 

Broward County Property Appraiser ( www.bcpa.net)

” There is no telling how many miles you will have to run while chasing a Dream”. ….Author Unknown

My office had a meeting the other day and our guest speaker was Barika Williams from the Broward County Property Appraisals office.  She wanted to help us with our many questions regarding the appraisals and the information on the tax records.

Barika’s explanations on how the system works was very informative and helped us to understand better so we as consultants can pass this information on to our buyers and sellers. 

There is the “Trim Notice”  information that you should receive if you are a homeowner from the Appraisals office.  In this flyer you can get most of your questions answered and it explains the full tax notice line by line.

portability Tax is something you must apply.  Your taxes are not just automatically adjusted from one home to another.  Also homestead exemption is not just put on your taxes you must apply within a certain time period after you have closed on your home.  It does not transfer from one home to another. 

There are many ways you can save on your taxes.  The best way to get all your questions answered and to be saving as much money on your taxes you can is to go to their website.

HOLISTIC FINANCIAL COUNSELING

“When I let go of what I am, I become what I might be.  When I let go of what I have, I receive what I need.”….   Tao Te Ching

 

 

 Holistic financial counseling – This focuses on a borrower’s entire financial situation and can prevent both foreclosures and re-defaults, according to a recent study sponsored by Florida-based special servicers, Outreach Financial Services.

I read this article regarding this program and wanted to share.  I have put in the links for you to get more information.  If this can help even one person it was worth my time to pass on.  Good luck!

Outreach Financial Services partners with the National Foundation for Credit Counseling, to provide holistic credit counseling to borrowers at risk of default.

 

Jumbo Mortgages Changes…..

“We Cannot Direct The Wind But We Can Adjust The Sail.” 

Author Unknown   

                                  

Effective October 1, 2011, Fannie Mae and Freddie Mac lowered their conforming loan limits, going back to 2008 levels.  So what does that mean?  Many buyers suddenly need a jumbo loan to qualify for the home they want.  Making sure that your buyer has a good knowledgable  mortgage broker to guide them.

What makes a “JUMBO MORTGAGE” jumbo?  If the loan amount exceeds the maximum set by Fannie Mae and Freddie Mac, then the loan is deemed “nonconforming ” or “jumbo”.  For the highest-cost areas of the country, the maximum was $729,750 until October 1.  But now, it has been lowered to $625,000.  Moody’s analytics estimates that the highest-cost areas that will be most impacted by this change are in the Northeast, but some parts of Florida and Chicago areas will be affected as well.

PRICE – vs – COST of a HOME…….

” If you can Image it, you can achieve it. If you can Dream it, you can Become it.” William Arthur Ward

                                                                                                                                                                 

 

There is a lot of research coming out showing that it makes great financial sense to purchase a home today.  Whether it be Rent vs Buy ratios, Income-to-Price ratios or Income -to-Mortgage payment ratios, purchasing a home now is a bargain compared to historic norms.  Now we want to look at the COST of a home today compared to peak prices.

According to the most recent S&P Shiller price index, residential real estate values have returned to 2003 prices.  Then when you factor in mortgage rates, the case for buying a home today  becomes even more compelling.

In 2003, 30 year mortgage rates were at 5.88%, Today they are at 4%.  How does that impact the actual COST of a home.  On a home purchased for $250,000, here is the monthly cost:

That means you save $285.30 a month, $3,423.60 a year and $102,708 over the life of a 30 year mortgage.  You buy the home for the same PRICE but the COST is over $100,000 less.

 

 

 

 

 

                                                                                                                                                                                              

 

 

That 3.8% Tax On Homes In The Health Bill….

Many have asked questions about a possible 3.8% tax which will be put on home sales beginning in 2013.  So hopefully this will help  clarify this situation for everyone. I am not an accountant and give you this information just as a simple answer to the misconception. Understand that, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information. A little history on the confusion Fact Check.org explains it this way: The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home. We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.) The Joint Committee on Taxation, the group of nonpartisan tax experts that Congress relies on to analyze tax proposals, underscores this in a footnote on page 135 of its report on the bill. The note states: “Gross income does not include … excluded gain from the sale of a principal residence.” And just to be sure, we checked with William Ahern, director of policy and communications for the nonprofit, pro-business Tax Foundation. “Some home sales would see a tax increase under this bill,” Ahern told us, “but it would have to be a second home or a principal residence generating [a gain of] more than $250,000 ($500,000 for a couple).” Simple Explanation:  The following simple explanation comes from midiShaw: The tax will affect those sellers of real property who will be otherwise taxed on capital gains under current tax laws. Under current laws, if you sell your primary residence and meet the ‘time ‘ criteria, you are exempt up to $250,000 or $500,000 (filing individually or jointly).  Any amount realized OVER that amount is taxable under current tax schedules based on income.  As such, this new tax will apparently be added to the current capital gains tax burden IF your income is over $200,000/$250,000 (filing individually or jointly). For those selling second homes and investment properties, the tax, once again, will be applied to the amount of gain realized. Detailed Explanation: The following also comes from midiShaw in a comment to the above answer. Beginning in 2013, the national health care reform legislation that became law in March, 2010, imposes a new 3.8 percent tax on certain investment income. The new tax will apply to single filers with incomes over $200,000 and married taxpayers with incomes over $250,000. Under the law, the investment tax provisions in Chapter 2A of the Internal Revenue Code are placed under the heading “Unearned Income Medicare Contribution.” In general, this new Medicare tax will apply to investment income that is subject to income tax, which includes capital gains. Pursuant to IRC Section 1402 (C)(1)(A)(iii), the investment income to which this new tax applies includes “net gain” (to the extent taken into account in computing taxable income) attributed to the disposition of property that qualifies as a capital asset under Section 1221 (capital gains), as well as gains on other property that are considered part of ordinary income.   This is just an explanation. Remember, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.

SOFITEL LUXURY HOTEL – 45 W. 44th St New York, NY 10036

I had my first experience visiting the Big City a few weeks ago.  My daughter and I went for my birthday.  We happen to be there when it snowed in October for the first time since the Civil War.  That was pretty cool, but much colder than we had planned.

When booking my trip I asked friends, family and anyone that wanted to help me pick a place to stay.  I wanted to be close to everything , if possible and I was with my daughter so wanted to feel comfortable and safe.  I got many requests and suggestions.

The one that seemed to fit my needs was the Sofitel Hotel and it wasn’t much more than some of the others.  Well I just have to say, I have stayed at many hotels and by far this hotel topped the list.  The bed and pillows were like clouds.  The service and staff were more than courteous.  Yes I know this is their job but it was over and above.

I will be visiting the city more often now that I have seen what I’ve been missing all these years.  And I will be staying at the Sofitel Hotel. 

Just wanted to share.  I know there are a lot of great hotels in New York City but this one has got to be on the very top.  Check it out if you are planning a trip to the Big City.

And Your Not Buying…Why….

“The point is not to pay Back Kindness….But to Pass it on.”   Julia Alvarez

 

Here are Four Resources to Buy Now!!

Forbes Magazine – The next Mortgage Crisis

Wall Street Journal – It’s Time to Buy that House

MarketWatch.com –Now Might Be the Best Time Ever to Buy a Home

JP Morgan Market Insights – Housing. A Time To Buy

I hope these articles will give you a better insight on why you want to buy now!!!