 | |
JUNE 2009 | |
Santa Cruz Real Estate and Community News | |
We seem to have turned the corner, as prices are going up. And in Watsonville the market is getting hot. So if you've thought about buying investment property, now is a good time. The competition is tough on the well-priced properties. Highlights: Santa Cruz County home prices up 4.7% in May from April. Home sales up eleventh month in a row. Year-to-date, home sales are up 21%. Inventory declined for the thirteenth month in a row: down 39.8% from last May. | |
Quick links ...My Blog Summer at UCSC ...See a play. Visit the Farm. Learn about marine mammals. Check out this summary of summer activities at UCSC. Other newsAstronomer Greg Laughlin was interviewed on NPR's Science Friday and ABC Radio (Australia) about the possibility of collisions between Earth and the inner planets. There's also a picture of Ira Flatow, in case you enjoy listening to his program and are curious about what he looks like. FeedbackI welcome your comments about this issue and ideas for future ones. Send me email ReferralsIf you know anyone who is thinking about buying or selling real estate in Santa Cruz County, please let me email or call me at 831.246-4663 Thank you! | In this issue: Home prices rise | Pending Home Sales Up Third Month in a Row | 2009 First-time Home Buyer Tax Credit | Mortgage Rate Outlook Market NewsSanta Cruz County Home Prices Continued to Rise in MayThe median price for single-family, re-sale homes rose 4.7% from April. The median price was off 23.9% year-over-year. The average price fell 9% month-over-month, and was down 30.2% compared to last May. Sales of single-family, re-sale homes were up, year-over-year, by 10.3% in May. Year-to-date, home sales are up 21%. Inventory was down 39.8% from last May. This is the thirteenth month in a row inventory has declined year-over-year. [More] Pending Home Sales Up Third Month in a RowRecord low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®. [More] Mortgage Rate OutlookBond and mortgage markets spasmed at the end of May, and the corresponding sharp rise in rates over a two-day period served as a reminder that even a battered private market markets can be a dangerous animal. It wasn't completely clear what sparked the rout, but there was speculation that a combination of unclear goals in Federal Reserve quantitative easing programs, floods of new sovereign debt and shoddy treatment of GM bondholders all led to the selloff. [More]
Real Estate News2009 First-Time Home Buyer Tax CreditAs part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers. WHO QUALIFIES? First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009. [More] Zero Profit Doesn’t Mean Zero Capital Gains TaxesIn this difficult market, many taxpayers are selling property in short sales or other transactions with no profit. Unfortunately, what many taxpayers do not understand is that property may be sold with no profit, but still be subject to significant taxable capital gain. [More] |
Green CornerI did a test in my garden this year. One raised bed is filled with topsoil from a local dirt store; the other is filled with compost, from the dump. You won't believe the difference! Check out the pictures. | |
Wednesday, June 24, 2009
Santa Cruz Real Estate & Community News
Topsoil vs. Compost... And the winner is:
Check out the difference... compost bed on the left, top soil bed on the right. The same brick is in each photo, for scale.
For More Information
Please contact me if you'd like more information about our community or real estate market:
Walter Stauss, Lifestyles Real Estate
500 Seabright Avenue, Santa Cruz, California 95062
Cell: 831.246.4663, Email: walter@831.com, Web: http://www.831.com
Taxpayers Beware: Zero Profit Doesn’t Mean Zero Capital Gains Taxes
In this difficult market, many taxpayers are selling property in short sales or other transactions with no profit. Unfortunately, what many taxpayers do not understand is that property may be sold with no profit, but still be subject to significant taxable capital gain.
How is this possible? It is possible simply because gain results not just from appreciation in value, but also results from depreciation deductions taken during ownership of the property, gain deferred from previous transactions, and from borrowing against appreciated equity in a declining market. These adverse tax consequences can be avoided by engaging in a Section 1031 tax deferred exchange.
How to Determine Gain
The formula to determine taxable gain is: Sales price less adjusted basis1= taxable gain
Three Situations Resulting In No Profit, But Taxable Gain
- Depreciation Recapture If a taxpayer takes depreciation deductions, those deductions reduce the taxpayer’s basis, thereby resulting in gain.
Example: Taxpayer acquires investment property A for $200,000. Taxpayer’s basis is therefore $200,000. During taxpayer’s ownership, taxpayer takes $138,500 of depreciation deductions, thereby reducing taxpayer’s basis to $61,500. Taxpayer sells Property A for $180,000.00. Even though taxpayer sells the property for $20,000 less than what he originally purchased it for, he still has a taxable gain of $118,500 ($180,000-$61,500=$118,500) which will result in approximately $41,500 in federal and state taxes. This adverse tax result can be avoided by exchanging the property in a tax deferred exchange rather than selling the property.
- Carryover Gain If a taxpayer sells property previously acquired in an exchange – at no profit or even at a loss – the taxpayer may still be faced with significant taxable gain.
Example: Taxpayer originally acquired Property A for $20,000. Taxpayer disposed of Property A in a tax deferred exchange for $100,000 and acquired Property B for $150,000, thereby deferring taxes on $80,000 of gain. Taxpayer’s adjusted basis in Property B is $70,000 ($150,000 purchase price-$80,000 carryover gain=$70,000). Taxpayer now proposes to sell Property B for the same price as he purchased it for – i.e. $150,000. Although Taxpayer is not making a profit on this transaction, he will still have significant federal and state taxes of approximately $28,000 on his gain of $80,000.
- Excess Borrowing If a taxpayer borrows against appreciated equity in their property, tax consequences can also result if the property thereafter declines in value and the taxpayer is forced to sell the property for little or no profit.
Example: Taxpayer acquired property A for $1,000,000, paying $200,000 cash and borrowing $800,000. Taxpayer’s basis is $1,000,000. During Taxpayer’s ownership, the property appreciates in value to $1,400,000, enabling Taxpayer to refinance the existing loan of $800,000 with a new loan of $1,120,000. Taxpayer now sells, but since property values have declined, his selling price is $1,120,000. Although Taxpayer will receive no cash from the sale, he will still have taxable gain of $120,000 ($1,120,000-$1,000,000=$120,000), with combined federal and state taxes of $42,000.
As illustrated by the foregoing examples, sales of property that yield little or no cash can still result in taxable gain. Before selling in a down market, taxpayers and their advisors should first determine the taxpayer’s basis in the property to be disposed of and thoroughly discuss upfront the potential tax consequences. Taxpayers can avoid any of the tax consequences noted in these examples by engaging in a IRC §1031 tax deferred exchange.
For More Information
Please contact me if you'd like more information about our community or real estate market:
Walter Stauss, Lifestyles Real Estate
500 Seabright Avenue, Santa Cruz, California 95062
Cell: 831.246.4663, Email: walter@831.com, Web: http://www.831.com
Pending Home Sales Up Third Month in a Row
Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5.
Lawrence Yun, NAR chief economist, said buyers are responding to very favorable market conditions. “Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
The Pending Home Sales Index in the Northeast shot up 32.6 percent to 78.9 in April and is 0.8 percent above a year ago. In the Midwest the index rose 9.8 percent to 90.4 and is 11.1 percent above April 2008. The index in the South slipped 0.2 percent to 93.0 in April but is 3.5 percent higher than a year ago. In the West the index rose 1.8 percent to 94.8 but is 2.9 percent below April 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are numerous buyer assistance programs around the country. “Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location,” he said.
“Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger downpayment. Buyers who are wondering about their options should contact a Realtor®, who can advise consumers on the housing assistance programs and resources available in a given area.”
NAR’s Housing Affordability Index2 is in record territory. The affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.
A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.
Yun cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability. “In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” he said. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”
The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. “The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline,” Yun said.
For More Information
Please contact me if you'd like more information about our community or real estate market:
Walter Stauss, Lifestyles Real Estate
500 Seabright Avenue, Santa Cruz, California 95062
Cell: 831.246.4663, Email: walter@831.com, Web: http://www.831.com
Mortgage Rate Outlook
Bond and mortgage markets spasmed at the end of May, and the corresponding sharp rise in rates over a two-day period served as a reminder that even a battered private market markets can be a dangerous animal. It wasn't completely clear what sparked the rout, but there was speculation that a combination of unclear goals in Federal Reserve quantitative easing programs, floods of new sovereign debt and shoddy treatment of GM bondholders all led to the selloff.
Yields on the 10-year Treasury bond had lifted by just over half a percentage point in a few days' time, taking conforming fixed mortgage rates along for the ride. After standing at a familiar 5.03% on Tuesday, Conforming 30-year FRMs leapt to 5.29% on Wednesday and then 5.44% on Thursday before settling on Friday to 5.30%.
Overall, HSH's Fixed-Rate Mortgage Indicator (FRMI), which includes rates for conforming, jumbo and "high-limit" conforming data, rose by only 18 basis points to 5.64%, as the increase in the conforming portion was tempered somewhat by a softer response in Jumbos. An all-inclusive average for 5/1 hybrids increased by 10 basis points, closing the survey week at 5.15%.
Existing Home Sales rang in at a 4.68 million (annualized) rate of sale in April, a slight increase from March's figure but in line with recent figures, which have been showing a kind of "backing and filling" pattern for the past five months. Prices continue to ease -- they are 15.4% below year-ago levels, and the supply of inventory increased back to 10.2 months at the present rate of sale.
New Homes sold at a 352,000 annualized clip in April, almost exactly the same pace seen in March. Like their 'used' counterparts, prices here are about 15% below last year, but inventory levels continue to improve and now stand at 10.1 months available. According to the Commerce Department, the actual number of units on the market is now 297,000 and is starting to approach half of the peak levels seen a couple of years ago. The sooner inventory disappears, the sooner new construction can begin, and we are approaching that day steadily, if slowly.
For More Information
Please contact me if you'd like more information about our community or real estate market:
Walter Stauss, Lifestyles Real Estate
500 Seabright Avenue, Santa Cruz, California 95062
Cell: 831.246.4663, Email: walter@831.com, Web: http://www.831.com
Santa Cruz County Home Prices Continued to Rise in May
The median price for single-family, re-sale homes rose 4.7% from April. The median price was off 23.9% year-over-year. The average price fell 9% month-over-month, and was down 30.2% compared to last May.
Sales of single-family, re-sale homes were up, year-over-year, by 10.3% in May. Year-to-date, home sales are up 21%.
Inventory was down 39.8% from last May. This is the thirteenth month in a row inventory has declined year-over-year.
The drop in inventory and the rise in sales combined to push our Days of Inventory indicator down 21 days to 156 days. In a balanced market, the supply of homes is usually around five to six months. For condos, the indicator rose thirteen days to 172 days.
The sales price to list price ratio rose 0.8 of a point to 98%.
Pending sales, a leading indicator, were up 35.1% year-over-year.
Condo sales were up 3.4% year-over-year. Year-to-date, condo sales are up 28.3%.
The median price for condos rose 17.5% from the month before, but was down 9.2% compared to last May.
Condo inventory was down 34.4% compared to March 2008.
Pending sales for condos is up 25% year-over-year.
The real estate market is very hard to generalize. It is a market made up of many micro markets. For complete information on a particular neighborhood or property, call me.
For More Information
Please contact me if you'd like more information about our community or real estate market:
Walter Stauss, Lifestyles Real Estate
500 Seabright Avenue, Santa Cruz, California 95062
Cell: 831.246.4663, Email: walter@831.com, Web: http://www.831.com
Subscribe to:
Posts (Atom)