Monday, October 30, 2006


Have you been writing off your mortgage interest and real estate taxes correctly on your federal income tax filings? Or maybe not?

Whatever your answer, an influential Capitol Hill committee believes tens of thousands of homeowners have been deducting a lot more than they should -- to the tune of hundreds of millions of dollars a year.

Now the nonpartisan congressional Joint Committee on Taxation has proposed to the Senate and the House that they consider plugging two revenue-losing loopholes in the system, and crack down on homeowners who are deducting too much.

In a new report released last week, the staff of the committee recommends requiring local governments or mortgage lenders to annually report to the IRS the itemized details of the property tax payments claimed by millions of homeowners. Property tax deductions now cost the federal government $20 billion a year, according to committee estimates. A 1993 federal study found that approximately $400 million of that year’s property tax writeoffs were improperly claimed -- a figure that could easily be double that today.

Under current tax code rules, homeowners are permitted to write off local and state property taxes that are assessed on the basis of property valuations. But commonplace special levies and user fees -- for governmental services that mainly benefit individual houses or neighborhoods rather than the entire municipality -- are not deductible.

Special parkland improvements, sewers, sidewalks, garbage collections, landscaping, tennis courts and a long list of others sometimes are funded by tax levies on the property owners directly benefited. Local governments typically include their special benefit levies in with their regular property tax bills when they send them to homeowners, but they do not report the itemized breakdowns to the federal government.

The committee believes the IRS would be in a better position to audit homeowners’ tax deduction claims if the agency received an annual itemization -- either from local governments directly or from the mortgage lenders who typically disburse the tax payments from their borrowers’ escrow accounts. Since lenders already report total mortgage interest paid by each borrower to the IRS, the committee believes it would not be a major inconvenience to add in property tax itemizations with those reports.

The staff recommends that either local governments or mortgage lenders be required by federal law to provide the IRS with such itemizations annually.

The committee’s second target for real estate-related loophole closing involves home mortgage interest -- a $70 billion revenue-drain item in this year’s budget. The committee believes that many homeowners who refinance their mortgages improperly claim “points” on their interest deductions for the year of the refi. But IRS rules require refinance points -- interest paid in advance -- to be written off on a pro-rated basis over the life of the loan.

The committee also believes that homeowners who do cash-out refinancings may be writing off mortgage interest improperly -- claiming deductions on more than the $100,000 in home equity debt the tax code permits.

To close both loopholes, the committee proposes requiring all mortgage lenders and servicers to report whether new loans are refinancings, and whether the refi resulted in a new loan more than $100,000 larger than the mortgage it replaced.

The committee staff’s recommendations are often highly influential and find their way into law. So don’t be surprised if the new real estate proposals surface early in the new Congress next year for inclusion in a major tax bill.

Published: October 30, 2006

by Kenneth R. Harney
Realty Times

Friday, October 27, 2006


U.S. housing prices may decline "a little" within the next year, but any such drop is likely to be mild and inconsistent with a bursting housing bubble, according to a paper written by a Federal Reserve economist.

Based on an analysis of housing futures and options and derivatives of housing-related company shares, "market participants expect home prices to decelerate sharply or actually decline a little within the next year," wrote J. Benson Durham, an economist with the Fed's monetary affairs division. However, the anticipated drop in prices "is mild compared to some estimates of the purported overvaluation of the housing market," he added. The paper, dated September, was posted on the Fed's Web site Thursday.

Mr. Durham cautioned that deep and liquid markets needed to signal future home-price trends don't fully exist and that housing futures and options have only been trading on the Chicago Mercantile Exchange since May 22. Still, implied volatility on CME housing options are greater than the historical average, "which suggests that investors see more risks to home prices going forward," he wrote. That higher uncertainty, however, is "generally inconsistent with the perception of a "bubble,'" he added.

Mr. Durham also examined options on shares of certain homebuilders to gauge whether investors see upside or downside risks to home prices. Those options "are only marginally negatively skewed at the present time," he wrote. "This suggests that market participants do not, in fact, view the risks to home prices or, perhaps more accurately, to the broader housing sector as especially tilted to the downside," Mr. Durham concluded.

The paper's conclusions seem in line with the thinking of Fed officials that the sector will slow substantially through the rest of 2006 and into 2007 but is unlikely to derail the economic expansion.

In the minutes of the Sept. 20 Federal Open Market Committee meeting, the Fed said housing "seemed to be cooling considerably" but that the overall economy should strengthen next year "as the housing correction abated." Officials also continue to remark that higher inflation poses a greater risk than a slower economy.

Housing data had declined markedly in recent months, raising fears of a housing-induced slowdown severe enough that it would eventually require Fed rate cuts. But there have been tentative signs of stabilization of late. The National Association of Home Builders index rose in October, albeit by only one point, but nevertheless breaking a string of eight straight declines. And housing starts unexpectedly rose in September, breaking a string of three straight declines.
-- October 23, 2006

By Brian Blackstone
The Wall Street Journal Online

Wednesday, October 25, 2006


As with any resale product, the person trying to sell said product will usually try to make the product look as new as possible to ensure the highest profit available. In reviewing many of the homes on the market today, however, some sellers don't get that notion.

Don't make the mistake of the seller who, knowing full well that buyers were coming by, not only failed to do a fresh clean up, but also left his underwear on the exercise bike, a pan of crusty macaroni and cheese on the stove and debris throughout the yard.

There are some task items any seller should consider when selling a house. Even if you decide to sell "as is," a little soap and water could put a few more bucks in your pocket. With that in mind, let's look at what sellers should look at doing with any house they want to put on the market; what to do when you want to get a little more money; and how to compete with the Joneses when looking to prepare your home for sale.

Any House

  1. Next, declutter the house. Go ahead and rent a huge storage unit and fill it up. Plan this with a bunch of pre-made boxes that have lids you can tape shut and label. Take extra kid's toys to charity. Donate all clothes that are even a bit too tight or out of date. Remove excess furniture (or even cover with matching covers).
  2. Repair and paint where needed. As with most homes that have been lived in, that would be all of them. Walk through a new construction home to see what you're up against and then go and make yours look as best you can on your budget.
  3. Landscaping. Thankfully, mulch and flowering plants don't really cost a lot of money for those who are just sprucing up. Before going out and paying for a designer-created landscaping job, start with the local garden center and get some free advice on how to spruce up on a budget. Fresh, flowering plants (even in fall and winter) can make the house look oh-so much better.

Even if you're selling as-is, the above four tips are a must. Next is where we spend a little more money.


  1. Renewed color. Giving your house a makeover doesn't have to cost you a second mortgage. The first item to consider for rehab is your color selection. While the traditional advice is "go vanilla," professionally selected colors (not too bold) can make a "nice" house into a "wow" house.
  2. Flooring is one of the best moderately priced upgrades a seller can install to make a huge difference. While I like the concept of "choose-your-own-carpet" offers in home listings, think about what else it's saying: "We're too cheap to fix up the house now, so we'll let you walk through our tattered, stained carpeting and let you get it installed the weekend after we leave." Like I said, make your house a "wow" by making that first great impression with new carpet.
  3. Replacing dated items. Sometimes replacing certain items in the house is really more like maintaining your home instead of upgrading it. Items like windows, doors, light fixtures, faucets, door hardware, etc., need upgrading and replacing periodically. A walk down the light aisle at your favorite hardware store reveals this could be done on a budget. Nevertheless, there's nothing more gross looking than a brass light fixture that's chipping and rusting.

Keeping up with the Joneses

At some point you have to look at what the neighbors are doing and keep up or you'll lose out. If everyone in the neighborhood is ripping out the old and installing the new (kitchen, bath, carpet, doors, etc.) then you may be forced to do the same thing long before you're thinking of putting your home on the market. My wife and I are facing that right now with the kitchen. It's starting to show its age, which means before we put the house on the market in a few years, if I want the best buyer (or any buyer for that matter) the kitchen cabinets need an upgrade.

Redo, Remodel, Relax

As you look around the house, making your list of things to change before putting the house on the market, remember to create some time to enjoy your new digs before selling the place. If a sale is on your horizon and you must redo the landscaping before putting the house on the market -- do it early so you can drive home to the professionally designed flowerbeds and floral creations a few months or years before selling it to someone else.

While you want to repair, paint, remodel and add on to your house because it adds value to your home, every homeowner should especially do it because they want to enjoy the changes as well.

Published: October 20, 2006

By M. Anthony Carr
Realty Times

Tuesday, October 24, 2006


High earners expect to purchase more properties in next few years

Tuesday, October 24, 2006

Second, third and fourth homes are still in vogue for affluent homeowners who participated in a study by Sotheby's International Realty and Architectural Digest.

Thirty-six percent of Architectural Digest subscribers said they plan to buy an additional home in the next two years, and of those who already own three or more homes, 49 percent plan to purchase another home within two years.

Of those who already own a second home, 35 percent said they plan to buy a third home within two years.

Second homes also appear popular with younger owners -- 44 percent of survey respondents under age 45 said they may acquire a second home in the near future.

Geography is the primary driver when searching for a second home, according to the survey, but lifestyle amenities are becoming increasingly critical. About 32 percent of the participants know what amenities and characteristics they are looking for and would search in a number of locations to find what they want. Those with household incomes under $400,000 are more likely than their wealthier counterparts to indicate they would search in a number of locations to find the house that meets their amenity checklist.

What do these buyers want? The study found that waterfront property is the most sought-after amenity when buying a second home, with 75 percent of respondents choosing that characteristic. Proximity to golf courses and aquatic activities, and in-home fitness centers and media rooms/home theaters were also high on the list. Pools and large backyards were the least chosen amenities.

Regional differences were found mostly among respondents from New York and California, the survey found. New York metro-area participants are most drawn to waterfront or oceanfront properties, while Californians found this of less interest.

Also, Californians tend to be less interested in golf courses than other respondents and more drawn to in-home fitness centers.

New York-area metro participants are least interested in ski slopes, while Californians are most likely to search for proximity to the slopes.

By Inman News

Saturday, October 21, 2006


To help move at least some of the unsold houses glutting local markets, lenders are beginning to look "back to the future" for financing techniques that worked in the tough times of the 1980s.

One creative technique is known as a mortgage rate "buydown." Rather than lower the asking price on a house by thousands of dollars, a seller can offer a discounted rate package that lowers' purchasers' effective interest costs and monthly payments during the early years of their loans.

The most popular form of buydown in the 1980s was a "3-2-1" on a fixed rate 30 year mortgage. During year one of the new purchaser's mortgage, the seller agrees to pay 3 percentage points of the interest rate on the mortgage note. During the second year, the sellers pays 2 percent, and in year three the seller pays 1 percent. After that, the purchasers pay the full note rate.

To see how this works in practice, and why it can be a triple win -- for the seller, buyer and the realty agent -- consider this example. Say a seller has had her house on the market for months at $210,000 with no serious offers. She could cut the asking price, say to $200,000, to stimulate some bids. Or, more creatively, she could advertise a "3-2-1" buydown -- essentially subsidizing any qualified purchaser's mortgage payments during the first three years.

Here's how it would work, according to an active proponent, Joseph Lipes, president of Connecticut-based Family Choice Mortgage Corp., who ran the numbers for Realty Times. The sale would be for $210,000, not $200,000. Assume the going 30-year fixed mortgage rate is 6.5 percent. The purchaser applies for a 95 percent ($200,000) mortgage.

In year one, the purchaser's 6.5 percent rate would be subsidized down to 3.5 percent by the seller, creating a monthly payment of $898.09 for the purchaser, instead of the full $1,264.14 principal and interest. The seller's outlay for the subsidy would come to $366.05 a month, or $4,392.56 for the full year.

In year two, the purchaser would be paying at a 4.5 percent rate or $1,013.37 a month. The seller's contribution would be $250.77 per month or $3,009.20 over 12 months.

In the third year, the purchaser would be paying at a 5.5 percent rate, or $1,135.58. The seller would contribute $128.14 a month for a total of $1,542 for the year.

During the course of the three years, the home seller would pay a total of $8,999.44 in rate subsidies, according to Lipes. "So rather than have the sellers lower their sales price from $210,000 to $200,00" -- which might not strike potential purchasers as all that interesting -- "the sellers keep their price at $210,000 and pay $8,944.44 for the three year buydown," a savings of more than $1,000.

"As long as the house appraises for $210,000, it's a win" for the seller, the buyer, and even the realty agent who's commission will be slightly higher because of the higher sale price. Even more important for the Realtor: the house gets sold, in part because the buydown concept can be very attractive to certain purchasers, especially those with tight budgets that will be stretched in the first several years paying for new furniture, appliances and the like.

Lipes points out that Fannie Mae guidelines permit purchasers to qualify for the mortgage at the "bought-down" rate -- 3.5 percent in this case -- provided it's a primary residence and the purchaser has a 660 FICO score minimum (680 for self-employed individuals.) On sales of second homes or investment properties, the rule requires qualification at the full note rate.

Lipes says, "Buydowns have no hidden pitfalls such as negative amortization loans, payment-shock ARMs or others." It's all straightforward, easy to understand, and most important of all in sluggish markets: It's a novel approach in the eyes of many potential buyers today, and it really works.

Published: October 9, 2006

By Kenneth R. Harney
Realty Times

Wednesday, October 18, 2006


You have the new home, the new community, the new school district. Your home has all of the newest bells and whistles. But does the most basic of human needs meet high standards?

Water quality is not uniform in the United States. Drinking water quality is dependant on safe sources, competent processing, and ongoing monitoring by regulator, and out of those dependencies, you essentially have three drinking water choices. You can install a well on your property. You can use tap water from a local water company. Or you can rely on bottled water. Not all choices are equally available everywhere.

Let's start with well water. It may be a good option if you can install a well that produces healthy water. However, will you monitor it often enough to make sure that it does not become contaminated? Many people do not monitor enough. And you need to understand that a person with well water depends not only on his or her own on site activity to preserve water quality, but on activity of neighbors as well. And that might not be easy to regulate.

If public tap water is available, that might provide you with an option. The benefit of tap water is that in many places you are going to receive a product that is administered by professionals. There are water quality engineers who on a regular basis will be evaluating the treatment of the water that your family is drinking, the quality of the distribution system, and ultimately the quality of the end product.

The federal EPA has strict standards that are applicable to water from the tap. If water providers fail to meet certain quality standards, they can be fined and in rare instances, even have criminal penalty exposure.

Every year, many public water providers in the United States are required to provide reports relating to the quality of the water. If you want to know how good or bad your water is, you can ask your water provider for the most recent report. Most of this information is also available online.

The interesting thing about these reports is that they are intended to instill public confidence. However, in many instances if you review the report you will find that while the water quality may be legally acceptable, sometimes it is just barely legally acceptable.

For example, you might find that there are very high levels of pesticides in the water. Perhaps they are still within the "safe" range, but the levels may be high and persistent. You might also find that there are bacteria or microbe problems associated with the water.

In these instances, the question you have to ask yourself is whether you are satisfied with water that just barely meets safe levels. Personally, I would rather not have any pesticides in my tap water. I would run rather not have a high level of bacteria in my water. And I would rather not have any microscopic organisms in my water that can make me ill.

Keep in mind that some contaminant levels are normal, safe and acceptable. The question might be whether levels that approach the high end of a range considered to be "safe" are acceptable to you and your family. That is a personal choice that you have to make.

The next option is bottled water. There are people who seem to think that bottled water is always better than tap water. That is obviously not true. Some tap water is very good. Some bottled water is very good.

Bottled water and tap water actually are very similar in that the quality of the product is dependent on the source of the water and subsequent processing. If the water comes from a well that is in a highly industrial or agricultural area, the water might be negatively impacted. Wells can be installed to protect the water inside them, but that is not always fail safe. Mistakes happen and human error happens as well.

Bottled water companies often treat their water before selling it to the public. There are various kinds of treatment mechanisms that are available. In the end, the bottled water providers are supposed to provide you with a quality of water that more or less is the same as the quality set by the EPA for tap water.

There are some people who drink bottled water exclusively and rotate the manufacturers. In a way I think that might be a good idea. This way, even if one product is deficient on one occasion, it can be offset with water from other providers and other sources.

Finally, if you are going to rely on tap water, you might decide to engage in home filtering. According to some estimates, over 40 percent of American households treat their drinking water in one manner or another. Treatment ranges from simple pitchers that cost under $20 to sophisticated systems that can cost hundreds of dollars.

Water filtration systems can improve the taste of water. For some people, that is all that they're looking for. Other persons use filtration systems because they have health concerns.

Water filtration pitchers are inexpensive. They can help with taste and some, but not necessarily all, contaminant removal. Filters must be changed as directed.

Another kind of filtration system consists of filters that are attached to faucets installed under the sink. These filters generally rely on the same kind of technology as pitcher filtration systems.

Reverse osmosis systems force water through membranes under pressure leaving contaminants behind. They are very effective for many contaminants .

More sophisticated systems are also available. Some systems work better in treating some pollutants than others. Which means you really need to understand what is you are drinking before you purchase a filtering system.

Persons with compromised immune systems may have special concerns that impact upon the correct filtration choice. Their doctors should help them make these decisions.

In conclusion, there are numerous drinking water alternatives. Which one is appropriate for your family? It depends on the quality of the local water supply, your required level of safety, and your budgetary concerns.

There are experts in water treatment who are available to guide you through the process. Local regulators may also be able to provide guidance.

Published: October 12, 2006

By Stuart Lieberman
Realty Times

Monday, October 16, 2006


Moving to an area with lower housing costs often doesn't pay off for low-income Americans, according to a study to be released today by the Center for Housing Policy, a nonprofit research group based in Washington.

The study, which looks at families with low to moderate incomes in 28 metropolitan areas, found that transportation costs in places with cheaper housing are often so high that they wipe out the savings from lower rent or mortgage payments. Such places tend to be farther from employers or short on public transportation, which makes commuting costlier.

The study found that housing and transportation costs combined eat up an average of 57% of annual income for "working" families, which the study defines as those with incomes of $20,000 to $50,000 a year. The combined costs ranged from 54% of income in Pittsburgh to 63% in San Francisco; in 25 of the 28 metro areas, the combined total was within three percentage points of the 57

The findings contradict the common notion that many people would be better off financially if they moved from areas with high housing costs, such as California, to states like Texas or Georgia, where housing is much cheaper.

The median house price in San Diego, at $613,000, is four times that of Dallas. But the study found that working families in San Diego spend 59% of their income on housing and transportation, only slightly more than the 57% they spend in Dallas. Families in Dallas spent just 26% of their income on housing, compared with 31% in San Diego, but the Dallas families spent more on transport.

The study also found that moving to an inexpensive outer suburb, but continuing to work near a city center, often backfires. Typically, a move that adds more than about 12 miles to a one-way commute will result in a rise in transport costs that outweighs the savings on housing, the researchers found.

The data on housing and transport costs for working families come from the 2000 U.S. Census. Since then, both housing and transport costs have jumped, but Barbara J. Lipman, research director at the Center for Housing Policy, said the results are still valid. Housing and transport costs have grown by roughly similar amounts.

The center is an arm of the National Housing Conference, a nonprofit group that favors more spending on affordable-housing programs for low- and moderate-income people. The conference is funded by groups including the MacArthur Foundation and mortgage-finance companies Fannie Mae and Freddie Mac.

-- October 12, 2006

By James R. Hagerty
Wall Street Journal Online

Thursday, October 12, 2006

Charging Ahead With Furniture Designed For Gadget Lovers

Furniture makers have hit upon a design that's truly electric.

As more consumers buy gadgets like cellphones and MP3 players that need frequent recharging, manufacturers are offering new ways to manage the tangle of cords, devices and outlets. Their solution: A handful of makers are equipping nightstands and coffee tables with dedicated storage spaces to hide cords and electronics from view, and building power strips right into the furniture.

Computer desks and TV cabinets have long offered power strips, but now the idea is moving to other rooms. Last year, Vaughan Furniture in Galax, Va., introduced a line of bedroom furniture called Guest Quarters, which includes a $300 bedroom nightstand with electrical plugs, USB ports and phone and Internet jacks inside the top drawer. Tualatin, Ore.-based Anthro brought out eNook, a $400 wall-mounted desk with "peripheral perches" and an optional seven-outlet strip in December. The desk shelf can be flipped up to hide the equipment. Last year, Sligh Furniture in Holland, Mich., released a $1,055 traditional-style mahogany deck -- a 14-inch-tall set of drawers and shelves -- with a three-plug recharging port on the back panel of a shelf.

More pieces are coming. Later this month, aspenhome is launching the NanoDesk, from $795. Consumers can top it with a set of shelves and drawers, one of which includes hidden outlets and four compartments to store hand-held devices, for about another $700. Milan-based Danese is bringing out the Kada in October, which will start at about $250, created by industrial designer Yves Behar in San Francisco. The coffee table, which doubles as a stool, has a removable top and an optional power strip hidden inside. Devices can rest inside or on top, while the cords stay below -- a small hole in the top allows the wires through.

Multiplying Devices

Makers are hoping to plug into the growing gadget market. By the end of this year, research firm IDC estimates there will be 223 million cellphone users in the U.S., up from 127 million in 2001. Research In Motion, maker of the BlackBerry, says it had five million subscribers in March, up from about one million two years earlier.

Just as users have had to avoid spilling drinks around the computer, bringing technology to everyday coffee tables and nightstands could create another challenge. "Until they make laptops and cellphones that are waterproof, we will need to be careful," says Mr. Behar.

And electronics makers advise against recharging devices -- a process that generates heat -- in an enclosed space. Some furniture makers have addressed the issue: The eNook, for one, has ventilation holes on the sides. Still, a spokesman for Research In Motion says, "The ideal condition is on top of a desk at room temperature." Apple says recharging or storing an iPod in a warm environment may hurt its battery, and when it's plugged in, users should let it "breathe."

Amir Efrati
The Wall Street Journal Online

Monday, October 09, 2006

Selling Your Home In Today's Market

According to the government, single family home sales fell 4.3% in July 2006, confirming that the housing market is slowing down. The previous hype of the market bubble bursting seems to have been over-dramatized, but the bubble does seem to have a small leak.

Many parts of America experienced yearly appreciation rates of 20 to 40% over the past few years, especially homes in areas like California, Nevada, Arizona, Florida and other warm weather markets. Consider that if a home went up in value 40% for 3 years in a row, it would have more than doubled in value. This has proven to be a problem because buyers can’t continue to pay those inflated home values, meaning that eventually those markets had to experience a major slow down.

There are several areas across the USA that never saw those levels of value growth. During those years, many areas were experiencing appreciation ranging between 2 to 10% per year. Consequently, some areas in the USA’s home prices never got over inflated and overall the homes have remained affordable for people living in these communities and still looked like a bargain to their market.

What should you do if you live in a market that is seeing the slow down? First, don’t panic. There are several actions you can and should take to help your property sell.

Price your house competitively. Overpricing keeps potential buyers away, keeping your house on the market. Comparable sales information will be an important tool in assisting you in determining the right asking price for your property.

Make sure your home shows well. Creating “curb appeal” can make a significant difference in a potential buyer’s first impression of the home. Keep the yard groomed and the porch tidy. The inside is just as important – get rid of clutter and use effective and inviting interior lighting.

Make sure your realtor takes high quality photos of your property. 85% of potential home buyers look on the internet to begin their home search. Those photos may provide the first look at your property for those buyers, making the pictures an important selling tool.

These are just a few things you can do to help insure the timely and profitable sale of your home. A good real estate agent will have several more tips. Be sure to ask your realtor what they are going to do to make your home stand out above the rest and what do they suggest you do to make your home more marketable.