Homes - A Great Tax Deduction!

Daily Real Estate News March 28, 2008 Last-Minute Home Owner Tax Primer

Here's some great information home owners need to know about concerning the deductibility of mortgage interest and property taxes.Taxpayers may deduct on Schedule A of Form 1040 mortgage interest on the purchase or home equity debt on two residences, their primary home and another dwelling, including a boat or a mobile home. These dwellings must have sleeping, cooking, and toilet facilities to qualify for a loan interest deduction. Interest paid on vacant land isn’t deductible.

Real estate taxes are deductible on all properties owned by the taxpayer — not just the first two. The deduction must be taken in the year the taxes are paid. Taxes placed in escrow are deductible when they are paid to the taxing authority, not when the money is put in escrow. Penalties and interest on late tax payments aren’t deductible. Also, in order to deduct taxes and interest, the taxpayer must itemize instead of taking the standard deduction.

Source: Houston Chronicle, Shannon Buggs (03/27/08). This article is from REALTOR® Magazine Online Edition which can be found @ www.realtor.org/



Tax Benefits of Home Ownership

The tax deductions you can take for mortgage interest and property taxes greatly increase the financial benefits of home ownership. Here’s how it works.

Assume:

$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)

$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value
______

$12,577 = Total deduction

$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

(12,577 X .28 = $3,521.56)

Note that mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.


This article is from REALTOR® Magazine Online which can be found at www.realtor.org



Daily Real Estate News March 27, 2008
Don't Forget: PMI is Deductible

As April 15 tax day approaches, here is a reminder for home buyers with mortgage insurance. Home owners with adjusted gross incomes of $100,000 or less can deduct the full cost of their government or private mortgage insurance premiums on their 2007 federal returns.Families with incomes between $100,000 and $109,000 are eligible for a reduced deduction.This is a new tax break that Congress has approved through 2010. "On average, this year's tax break could be worth $350 per taxpayer — an annual deduction that qualified home owners can take each year through 2010," says Kevin Schneider, president of the Mortgage Insurance Companies of America (MICA).

Source: MICA (03/26/08). This article is from REALTOR® Magazine Online which can be found @ www.realtor.org

Why Use A REALTOR®?

The following is an article found on NAR's website at http://www.realtor.org/.

I know you understand the benefits of utilizing a REALTOR®; however, you may want to read this so you can inform your clients and customers as to why it is to their advantage to work with you.

All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again.

Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®.

But if you're still not convinced of the value of a REALTOR®, here are a dozen more reasons to use one:

1. Your REALTOR® can help you determine your buying power -- that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices.

2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date.

6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders.

7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.

8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

9. Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.

10. Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.
11. Your REALTOR® can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

12. Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

NAR Celebrates 40th Anniversary of Passage of Fair Housing Act

40 Years Later, Realtors® Remain Vigilant to Ensure Fair Housing for All Americans
WASHINGTON, April 01, 2008 Article from http://www.realtor.org/ -

As America celebrates the 40th anniversary of the passage of the Fair Housing Act this month, Realtors® continue to be outspoken advocates for fair housing, working with home buyers and sellers to ensure they receive equal access to affordable housing and homeownership.

The Fair Housing Act protects the basic right of all Americans to pursue the dream of homeownership, free from discrimination based on race, color, religion, sex, disability, familial status and national origin. NAR demonstrates its strong commitment to fair housing through partnerships with real estate diversity partners, education, and grant and award programs.

“Realtors® build communities and play a vital role in advancing fair housing laws and improving access to affordable housing,” said NAR President Dick Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “NAR and its 1.3 million members pledge to continue our work educating home buyers and homeowners in our communities about fair housing laws, discrimination and predatory lending practices, making the dream of homeownership viable for all Americans.”

NAR is working with Congress to make permanent the new FHA and conforming loan limits, mandated by the economic stimulus package, so that Americans can access affordable financing in all areas of the country. Realtors® also continue to push for a stronger, more flexible FHA program, to give more first-time home buyers access to affordable and safe financing options.

For the past decade, NAR has been educating Realtors® about being sensitive to and aggressive in meeting the homeownership needs of a diverse society through its “At Home with Diversity” program. More than 25,000 Realtors® have completed the course. In celebration of Fair Housing Month, NAR is waiving the At Home with Diversity® program fee for any local or state Realtor® association that sponsors the course in April. Realtors® can also save 50 percent off the online At Home with Diversity® course this month.

NAR also embraces fair housing by recognizing the efforts of individuals and organizations that advance minority homeownership. NAR joins together with five real estate diversity partners in sponsoring the HOPE Awards (Home Ownership Participation for Everyone). The awards showcase exceptional individuals and organizations that are working to increase minority homeownership, revitalize communities and expand affordable housing opportunities.

In 2007, NAR proudly contributed $1 million to the Martin Luther King, Jr. National Memorial Project. The memorial is due to open on the National Mall in Washington, D.C. in 2009.

In addition, NAR’s Community Outreach Department provides financial resources to local and state Realtor® associations for programs and activities that advance smart growth, diversity and housing opportunities. Grants of up to $5,000 are awarded twice a year; more than $239,000 was awarded in 2007.

This article is from NAR's website @ www.realtor.org where you can find other very interesting and informative articles on a variety of Realtor® related topics.

Henry Paulsen's Blueprint for Regulatory Reform

Back on 2/3/08 Treasury Secretary, Henry Paulsen, announced a proposal to overhaul the U.S. financial regulatory system that is the broadest sweeping such plan since the stock market crash of 1929. It is called the Blueprint for Regulatory Reform.

The plan calls for a broad expansion of the Federal Reserve’s powers, allowing the Fed to exercise greater powers to oversee and ensure the stability of the country’s financial system, instead of relying on the traditional, but limited market rate-adjustment mechanisms it utilizes to steer monetary policy.

Specifically, the Fed, under Paulsen’s plan, would gain oversight of Wall Street securities firms and streamline the number of current bureaucratic regulatory agencies from five down to one. A mega-agency would thus emerge and perform the duties previously done by the Office of Thrift Supervision, as well as merge the Securities and Exchange Commission with the Commodity Futures Trading Commission, which agencies would then be dissolved.

There has been very divided reaction to this plan so far. Some believe it would create a better-streamlined agency that could respond to financial crises with greater ability, effectiveness and faster measures. However, some are concerned that, at least in the short run, it would not be a good idea because the Fed’s new oversight would only be exercised when in a crisis and not beforehand, based upon the oversight and intervention it would exercise. Most, however, believe that this plan is going in the right direction and is, at least, is a first start toward needed and more updated regulatory reform.

Mr. Paulsen has stated before Congress and elsewhere that simply more regulation is not the answer. Rather, a regulatory model that has the authority and power to exert greater intervention would enhance greater financial stability and effective regulatory reform while not “socializing” the markets with too much governmental regulation and control.

The Blueprint for Regulatory Reform will have to makes its way through the scrutiny and consideration of Congress. It is anticipated that this will take a great deal of time and any reform will probably not become reality until the next administration.

NAR Reacts to Paulsen's Proposal to Restructure Regulatory Authority of Government Over Financial System

REALTORS® Say Treasury "BluePrint" Causes Financial Concern and Controversy

WASHINGTON, April 03, 2008 - The National Association of Realtors®, in a letter today to U.S. Secretary of the Treasury Henry Paulson, expressed opposition to the “Blueprint for a Modernized Financial Regulatory Structure,” which would permit banking conglomerates to engage in the commercial activity of real estate brokerage and management, and asked the Treasury to withdraw this proposed rule.

“The blueprint makes extremely ambitious recommendations, most of which, as you have acknowledged, will require many years of debate and refinement,” said NAR President Dick Gaylord. “The immediate response to the blueprint from those potentially affected confirms that the subject is one of great importance and controversy.”

NAR has opposed mixing banking and commerce for fairness and financial soundness reasons, which the current law prohibits. The association is extremely disappointed that this recommendation asks Congress to repeal the national policy against mixing banking and commerce and authorizes holding companies to own both insured depository institutions and commercial firms. “This poses a direct conflict of interest and offers unfair advantages,” said Gaylord in earlier communications.

NAR also questions whether it is good public policy to concentrate oversight of all insured depository institutions under one prudential financial regulator. As one example, Gaylord noted, “Requiring state banks to also have a federal charter will have the effect of weakening and very likely killing the state bank option under the dual banking system that dates back to the Civil War era.”

NAR has strongly opposed an earlier Treasury Department and Federal Reserve Board rule that was jointly published in 2001, which would allow financial holding companies and financial subsidiaries of national banks to engage in real estate brokerage and real estate management. “The current crisis in the credit markets and the strain on the banking system support our view that banks should not engage in any commercial activities. Allowing bank conglomerates to divert their focus from financial activities onto commercial activities will do nothing to strengthen the nation’s financial system,” Gaylord said.

This article is from NAR's website @ www.realtor.org. Articles like this one, as well as others, can be found there.

February Home Sales Soft in New York

Albany – March 26, 2008 – Sales of existing single-family homes in New York State in February decreased by more than 12 percent compared to last February, according to preliminary single-family sales data accumulated by the New York State Association of REALTORS®.

The February 2008 sales total of 4,528 represents a 19-percent decrease compared to the 5,588 sales closed in February 2007. The February sales total fell 12.6 percent from the January 2008 sales total of 5,178.
The February 2008 median selling price of $230,000 represents an 11.5 -percent decrease from the February 2007 median of $260,000. However, the February 2008 median was only 2.1 percent below the previous month’s median of $235,000.

In February 2008 sales gains were reported in 19 counties compared to February 2007, while 16 experienced growth compared to January 2008.

Thirty-seven counties reported gains in median selling price in February 2008 compared to February 2007, while 29 posted gains compared to January 2008.

“The winter months are historically slow in terms of sales, and this month’s total is reminiscent of a typical February,” said Duncan R. MacKenzie, NYSAR chief executive officer. “Based on historical trends, we anticipate sales will increase as we move closer to the spring and summer months, especially as buyers take advantage of historically low mortgage finance rates and increasing inventory levels. The recent actions by the federal government intended to assist the housing market should also bring improvement in the coming months.”

This article is from NYSAR's website @ www.NYSAR.com along with other articles and important information for REALTORS® and the public.

More Relief for Homeowners Offered by Washington - Just Announced!

The following is a portion of an article that appeared in the Wall Street Journal Article dated 4/3/08 authored by Sarah Lueck

Several key senators this week came to terms on a $15 billion bipartisan plan aimed at bolstering the struggling housing market. To get the package up for debate in front of the full Senate, Democrats dropped a bankruptcy provision opposed by Republicans and agreed to halve funds for counseling at-risk homeowners to $100 million.

For their part, GOP lawmakers agreed to a smaller tax credit for homeowners than they initially sought and accepted $4 billion in block grants for communities to buy and refurbish foreclosed homes. The plan would not only increase the size of loans backed by the Federal Housing Administration to $550,000, it also would raise the down-payment requirement to 3.5 percent from 3 percent. Additionally, the legislation includes $10 billion of mortgage-revenue bonds that states can issue for refinancing and for first-time home buyers, a $6 billion tax break for builders, and a provision to allow the nearly 28 million homeowners who do not itemize their taxes to get a deduction on their property taxes.

This article is from NYSAR's website at www.nysar.com. Other news articles and information can be found there as well.

Quote of the Week

"Our attitude toward life determines life's attitude toward us."

—Earl Nightingale

Connecticut Unveils Statewide MLS Public Site

Inman News reported on 3-19-08 that Connecticut initiated a statewide public property search site with 31,000+/- property listings.

CTreal.com features interactive mapping for home searches utilizing a Google-based mapping platform complete with a drawing tool that allows users to define the home search area.

Connecticut MLS Inc., is a broker-controlled MLS with about 13,000 members. It operates the website and posts information on all classifications of properties and is official statewide MLS of Connecticut. CTreal.com is the group's group's official website.

Connecticut began creating the website in March 2007. Cameron Paine, CEO for Connecticut MLS Inc., said that there was not unanimous agreement amongst the members to create the statewide public-search MLS website. He said, "I think there has been a change in the thinking of brokers and agents alike in that they now see a very strong benefit to the idea of a centralized source for their real estate listings."

A paper released by a real estate consulting group (un-named by Inman News) noted that real estate professionals are divided on their support for such a website while consumers are in favor of sites such as this. Cameron Paine noted that the success of HAR.com, a public MLS search site operated by the Houston Association of Realtors® draws more traffic among the region's users than all the real estate websites combined, including Realtor.com.

Connecticut MLS Inc. is currently considering whether it should send property information to third party websites such as Zillow.com, Cyberhomes. com and Trulia.com in the form of bulk listings, called listing feeds. Meanwhile, MLS Property Information Network, a Realtor® owned MLS in Shrewsbury, Mass., (having 30,000 participants) announced on 3-19-08 a partnership to provide such listing feeds to Zillow.

Connecticut MLS, Inc., is currently debating if it should offer its listings to other third party websites, Cameron Paine said that broker members will retain the right to choose whether or not to participate in this third-party website sharing.

Member brokers of CTreal.com can choose to participate or not in allowing their listings to be displayed on that site, as well. This has enabled the Connecticut MLS, Inc., great flexibility in allowing its members to choose their level of participation.

CTreal.com has no advertising displayed on the website and it is provided to its members at no additional cost. Connecticut MLS, Inc., will market the site mostly through online advertising along with billboards and some other methods to get the word out.

Book Review - Saving The Deal

Title: Saving the Deal

Your buyer found the perfect home. Your seller found the perfect buyer. Yet, as you near closing, all types of title, mortgage, appraisal, and home inspection problems can keep you from closing. Mortgage expert Tracey Rumsey has seen it happen all too often. In her new book, Saving the Deal (AMACOM, 2008), she offers tips on how to avoid these potential deal-killers that jeopardize or delay transactions. Home listing and homebuying checklists in the book offer you questions to ask your clients to make sure these problems don’t surface later on and cost you a sale.

From the Book: 5 Common Deal Killers

Any number of pitfalls can arise during a transaction that prevent the buyer or seller from signing on the dotted line. In her book, Rumsey offers common scenarios she’s seen and how to overcome them. Here are five:

1. Title complications. The title is legal evidence of the ownership of the property and is crucial when trying to help your client buy or sell. But problems can arise when such issues as death, divorce, guardianship, and bankruptcy enter the picture. Review the title carefully — this goes for buyer’s agents too. Troubleshoot any potential title issues early on. Direct sellers to a real estate attorney to resolve any problems. And don’t just take the seller’s word when it comes to the title — look it up yourself. Most title companies offer access to a limited amount of title information through their Web sites.

2. Unrealistic equity expectations. Have a talk upfront about all of the costs of selling a home so that sellers don’t end up backing out at the last minute. Rumsey’s book offers a worksheet that you can walk through with your sellers to paint a realistic look at estimated final numbers on closing day. It takes into account such items as mortgage payoff, any mortgage prepayment penalties, sales commission, title insurance for buyers, closing and recording fees, and property tax pro-ration. But what if you crunch the numbers and then the seller realizes she can’t afford to sell? Better to know now than after the cost of your time and money later.

3. Financing snags. Your buyers find the perfect property, you write up the offer, and then their financing doesn’t go through. It’s not just about having good credit when it comes to getting a loan. Educate yourself about the loan process so that you can help buyers foresee any potential problems. For example, a recent job change, a probationary period when starting a new job, and jobs that rely on commission income can pose problems in getting loans. Also, help prepare first-time homebuyers by learning the guidelines of your state’s housing loan programs, which may offer below-market interest rate loans and down payment assistance.

4. Appraisals. When appraisals come in at a value lower than the contract price, you have a major potential deal killer. So listing agents need to make sure they list the home at the right price from the beginning. To counter a low appraisal, you can provide the lender with the process you used to determine the price of the home and appropriate comps. But don’t call the appraiser, unless you were the one who ordered it. Do not expect a request for a second appraisal to be granted; they rarely are. One solution is to drop the sales price to match the appraised value, if it’s a small difference. Otherwise, you may need to take more drastic action, such as offering a commission reduction to get the seller to move forward. “None of us like dropping our profit margin to save a deal, but sometimes it’s what we have to do to get to the settlement table,” Rumsey writes.

5. Pre-approval letters. These letters issued by a loan officer tell you that after a full review of the buyer’s credit, income, and asset status, she is very likely to meet the requirements of closing on a loan. Not so fast. Before your seller accepts the offer, make sure the buyer really can close. There are varying degrees of competency when it comes to loan officers, just like any other industry. That said, some of these letters issued are after a thorough investigation into the buyer’s finances, while others came from a five-minute conversation. Read each letter carefully. Does the letter state the actual sales price that the home the buyer is approved to purchase? Does it state that the buyer’s credit status, income, and assets have been verified? If these questions aren’t answered, call the loan officer for clarification. If the answers are “yes,” you likely found a solid buyer, Rumsey says.

Sneak Peek
“Deals can be saved by proactive thinking at the beginning of the transaction. Blowups or delays just before settlement, no matter who is at fault, hurt your client and your reputation. Your clients may logically understand that the problem had nothing to do with you, but there may still be negative emotions tied to you that may prevent them from calling in the future when they need an agent.”

About the Author
Tracey Rumsey has more than a decade of experience as a mortgage loan officer. She is the chair of the Utah Mortgage Lenders Association Education Committee and is also a mortgage and real estate continuing education instructor licensed with the Utah Division of Real Estate.

This review comes from REALTOR® Magazine Online. More review of other books are available from NAR's website at http://www.realtor.org/.

The Next Installment of Mr. Blanding's Builds His Dream House

I've posted 2 prior clips from this movie on this blog just for you to enjoy. I hope by now you've seen these video clips of this priceless gem. It is timeless and best yet it has to do with our business - real estate and the American dream! I first discovered this movie many years ago and have enjoyed watching it probably more than a dozen times since. Once again, it is called "Mr. Blandings Builds His Dream House" starring Myrna Loy and Cary Grant.

It is a comedy released in 1948 and directed by H.C. Potter. For you film buffs, it was written and produced by the team of Melvin Frank and Norman Panama and was an adaptation of Eric Hodgins' popular 1946 novel. Upon its release, it was a box office hit, and has remained a popular film via cable television and the home video market. Warner Home Video released the film to DVD with restored and remastered audio and video in 2004. Featuring a plot that can be easily identified with, the film has spawned a number of remakes, including the 1986 movie -The Money Pit starring Tom Hanks, 1993's The Dream House, and 2007's Are We Done Yet?.

Please consider renting or buying the movie. You will thoroughly enjoy it, guaranteed!

Governmental Affairs News - News You Can Use!

At The Capital
Leaders still working toward an on-time budget- Legislative leaders and Gov. David Paterson returned to the Capitol Wednesday and said they planned to make the April 1 budget deadline. Paterson told reporters that he is confident a budget can be put together soon. Senate Majority Leader Joseph Bruno announced that the Senate plans to work throughout the weekend to meet the budget deadline. Assembly Speaker Sheldon Silver said, “We are on target to do a budget on time; that is our goal.” Joint legislative budget committees are expected to meet today to lay out a schedule for subcommittees over the coming days. The legislative leaders and Paterson announced that they have a “framework” of a deal that includes some increased fees and other unspecified funds, but they must hammer-out details. They are working within the framework of roughly $124 billion for the fiscal year that begins next Tuesday.

Action on Real Estate-Related Legislation

The following action on real estate related legislation occurred recently in Albany:

Increased Agriculture Disclosure Requirements (S.7061/A.10169) - NYSAR-opposed legislation to require purchasers of real property with 500 feet of the boundary of an agricultural district to be provided with disclosure of farming activities within such district was reported from the Senate Agriculture committee. NYSAR staff is speaking with lawmakers to express our opposition to the proposal introduced by Senator Winner (R-Elmira) and Assemblyman Koon (D-Perinton). The Legislation remains in the Assembly’s Agriculture committee. Click here to read the bill.

State News - NYRI
NYRI application denied for second timeThe New York State Public Service Commission has denied for the second time New York Regional Interconnect’s application for a nearly 200-mile power line from near Utica to the Hudson Valley. The Public Service Commission cited several deficiencies in the application including a study on how the line would impact the statewide electrical system, lack of information on substation facilities and the failure to mention the study of alternative routes. In addition, the Public Service Commission recommended that NYRI look more closely at the overall visual impacts of the power line. A spokesman for NYRI said the company was still looking over the letter from the PSC. For more information, visit the Public Service Commission site.

This update on government and politics in New York State is a weekly publication from NYSAR’s Government Affairs Department. REALTOR members and staff are urged to share this information as appropriate and reprint it in membership publications.

Dilbert - Have You Ever Felt This Way?

Tax Benefits to Owning A Home - Something Your Buyers Need to Know!

Well, it's tax season and we are all thinking about it. So, why not talk about the tax benefits of homeownership to our first-time homebuyers. Here's a short but informative article from REALTOR® Magazine's Online Daily Real Estate News for 3-7-08 on this very subject.

Tax Benefits of Owning a Home

Before a home owner curses the troubled housing market, he or she should take solace in the U.S. tax code, which makes buying a home a good deal for almost everyone.

Here’s why:

Mortgage interest deductions, including in some cases mortgage insurance premiums, reduce home owners’ tax liability by reducing income. The deduction includes interest paid on both a first and a second home.

Interest on home equity loans is also deductible — whether the borrower uses the money to remodel the kitchen or to take a vacation to Disney World.

Profits from selling a house are potentially a huge windfall. When a home owner sells a primary residence, any profit on the sale of the property is tax free up to $250,000 for single home owners and $500,000 for married home owners filing. Any profit above that is nearly always a long-term capital gain taxed at 15 percent — less if the seller’s tax rate is less than 20 percent.

Home owners can itemize. That opens up opportunities to deduct a host of other items that wouldn’t be deductible if the taxpayer took the standard deduction.

Source: The Boston Globe, Leonard Wiener (03/02/08)

Why Now Is A Smart Time to Buy!

The Following is an Article from REALTOR® Magazine, Daily Real Estate News March 11, 2008 - Now is a great time to buy a home, say the financial gurus at the Wall Street Journal.

The Journal calls it a buyers market and offers these suggestions for first-timers getting their feet wet. While their advice is solid, it’s not revolutionary, but some potential customers might find it reassuring.Remember this is a place to live not a stock market investment, they say. Lenders want buyers to spend no more than 28 percent of their gross monthly income on mortgage payments, real estate taxes, and home insurance. Buyers shouldn’t count on stretching further because lenders won’t approve their loans.

Cash is king. Having enough money in the bank to pay closing costs that are typically an additional 2 percent to 3 percent of the price of the home is necessary.

Location. Location, location. As any good real estate professional knows, homes in good school districts where the crime is low are much more likely to hold or increase their value.

Compare. Besides just looking at the comps, buyers should examine what it would cost to rent a similar house in the same area and they might consider what it would cost to buy land and build a comparable home.

Think long haul. It will probably take at least six or seven years of living in the house to be able to sell and come out ahead.

Source: The Wall Street Journal, Shelly Banjo (03/11/08)

Existing Home Sales on National Level Rise In February

According to a news item on NYSAR's website dated 3/24/08, sales of existing homes in February increased and remain within a fairly stable range according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate (1) of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007. The sales pace has been in a fairly narrow range since last September.

Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”

The national median existing-home price (2) for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.

Home prices within metropolitan areas are more telling. The most recent data shows roughly half of the metro areas in the U.S. with price increases, with healthy gains in markets such as Oklahoma City and Trenton, N.J. “In other areas such as Sacramento, a rapid price decline has induced buyers to come into the market and sales are now rising,” Yun said. “The relationship between home prices, interest rates and income has improved to the point where buyers are more serious about making offers.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.92% in February from 5.76% in January; the rate was 6.29% in February 2007.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, CA, said that negotiation and knowledge are even more important in the current market. "Consumers need to be aware of local market conditions and comparable sales prices to have a clear picture of a home's value," he said. " Realtors® understanding of local markets, negotiating expertise, and transaction experience are invaluable to both byers and sellers, today as much as ever."

Total housing inventory fell 3.0% at the end of February to 4.03 million existing homes available for sale. Single family homes sales increased 2.8% to a seasonally adjusted annual rate of 4.47 million in February fraom an upwardly revised 4.35 million in January, but are 22.9% below the 5.80 million-unit level a year ago. The median existing single-family home price was $193,900 in February, down 8.7% from February 2007.

In the Northeast, existing-home sales jumped 11.3% to an annual pace of 890,000in February, but are 26.4% below February 2007. The median price in the Northeast was $264,800, up 0.4% from a year ago.

The information above is an abidged article by the same title authored by Walt Molony at NAR. The National Association of Realtors®, "The Voice for Real Estate", is America's largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Quote(s) of the Week

This week I'm providing you with some quotes about generosity. This is an often overlooked virtue and one that is truly instrumental in fostering your own happiness. We were designed to be generous in our love and giving. If you wonder whether this is really true or not, let me ask you this: have you ever met a happy miser?

"What we have done for ourselves alone dies with us; what we have done for others and the world remains and is immortal."
— Albert Pike

"Since you get more joy out of giving joy to others, you should put a good deal of thought into the happiness that you are able to give."
— Eleanor Roosevelt

"No person was ever honored for what he received. Honor has been the reward for what he gave."
— Calvin CoolidgeFormer American President

"You have not lived today until you have done something for someone who can never repay you."
— John Bunyon

Bringing Out the Buyers - Another Great 'Must Read' Article by Economist Lawrence Yun

This article is from Real Estate Insights-The Forecast (A NAR Online Publication)

Bringing Out the Buyers
by Lawrence Yun, NAR Chief Economist

The “second” reading of GDP growth in the 4th quarter of last year was unchanged – a basically flat 0.6 percent growth rate. As we go forward, economic growth in the first half of this year will be essentially non-existent. But there is some light at the end of what many pundits view as a dark tunnel. By the second half of the year, the economy will expand at slightly higher than 2 percent. The 2008 fiscal stimulus package contains over $100 billion in tax rebates. Those checks should be in taxpayers’ mailboxes in early summer. This tax cut is more than twice as high as a similar rebate passed in 2001. Past research suggests that consumers’ propensity to spend out of those tax rebates is about 40 cents to 50 cents on the dollar. That translates into additional consumer spending of $60 to $80 billion in the second half of the year. Make no mistake – this stimulus is the key factor in helping move the economy in the second half of the year.

Other Factors than Housing Involved in Economic Doldrums

Seems like most people blame the housing downturn for our economic doldrums. But there are other factors. This tax rebate is needed to compensate for outrageously high oil prices and from falling stock market values. A $104 dollar per barrel oil price is a major drag on consumer spending – and something that virtually every consumer feels. Europeans are not paying as much because of their stronger currencies. The higher oil price, which is priced in U.S. dollars, is partly driven by the very weak dollar. The weaker dollar is caused in part by a higher inflation rate in the U.S. vis-à-vis the rest of the world’s advanced economies. If a currency is losing its purchasing power, why hold that currency?

Recall, the oil price was under $20 per barrel just 10 years ago. When the price of oil rises, it is essentially a tax placed on consumers with less money available to spend on more enjoyable items and activities. This “oil tax” unfortunately does not even go into the U.S. Treasury. Rather it fills the coffers of the governments of Russia, Venezuela, Saudi Arabia, Nigeria, and Iran. In today’s world, it is a transfer of money from a democratic country to a non-democratic country. The housing market will also get some relief. A higher loan limit – up to $729,000 from $417,000 – in several local areas, including Los Angeles, Orange, and San Francisco counties, will have a big impact in bringing out the buyers. As a result, home sales in the second half of 2008 will no doubt be much stronger than in the first half. Look for existing-home sales to rise to a 5.7 million-unit pace in the second half versus 4.9 million in the first half.

Pent-Up Demand

Rising sales will also bring down inventory and help strengthen home prices. The national median price of an existing home will fall in the first half of the year and then rise in the second half. For the year as a whole, the median price will have fallen by 1 percent – after having fallen 1.4 percent last year. Of course, there will be tremendous local market variations. The Northeast region is likely to be first region to show signs of stabilizing and then strengthening housing market conditions. The West region will likely trail behind.

The West region could, nonetheless, surprise us on the upside. What is unique about the current housing cycle is the pace of price declines in some local markets, which can significantly improve affordability conditions in a short time. Home prices are falling at or near a double-digit pace in California, Nevada, and Arizona. A sudden quick home price adjustment may be just the thing to quickly induce buyers back into these marketplaces. After all, as is the case in many parts of the country, jobs have been created in those Western states over the past two years even against the backdrop of a housing market slump, and hence, there exists significant pent-up demand.

New home sales will take much longer to turn around. That is simply due to the fact that there are far fewer new homes being built. Single-family housing starts have fallen by more than 50 percent in the past two years. Based on housing permits – generally a reliable indicator of upcoming housing starts – new home construction will fall further for the remainder of the year. New home inventory has been trending down but more cutbacks are needed. Therefore, homebuilders need to further bite the bullet and hold back construction.

Loan modifications and other foreclosure mitigation programs are all well intended and good, but the best policy assistance in our current market condition is to unleash the pent-up demand. Any measures that violate the sanctity of private contracts – such as permitting judges to reset interest rates – should be avoided as those can greatly harm home sales by raising the cost of borrowing on new loan originations. There is some discussion of a possible tax credit for first-time home buyers. Such a policy will be a great stabilizer for the housing market and the economy.

This commentary and forecast along with other informative articles can be found on NAR's website at www.realtor.org

Why What Happened on Wall Street This Week Was Important and What's The Concern About Inflation?

As most of us know, commodities prices have rocketed for a quite some time now. Just consider how the price of oil and gold, just to name two commodities, have surged to record high levels in recent history. However, this week, commodity prices dropped drastically. By one account, commodity prices posted the largest decline in in last 50 years. The dollar came back from its lowest level since the early 1970s because of recent actions taken by the Federal Reserve and Treasury.

Based on the actions of late by the Administration,Fed and Treasury, the stock market may be taking a turn for the better and the initiatives by, most notably by the Fed, may already be starting to pay off.

The Federal Reserve has taken a number of measures of late - including lowering the discount and fed funds rates, providing over $400 billion in lending programs, providing a sizeable loan to JP Morgan Chase as it concerned Bear Stearns, providing a new overnight borrowing facility for key lenders, etc. Taken together these moves were bold and already look like they may be effective for stimulating the economy and stabilizing the housing market.

Now, how about inflation? Are the actions taken by the Fed inflationary? The Fed's actions by restoring market liquidity by flooding it with massive amounts of money would seem to suggest that it is inflationary. However, the Fed, while flooding the market with massive amounts of money also sold off Treasury securities. This has the effect of putting a wet blanket on any potentially inflationary actions by the Fed.

Will we see an era, like we did in the 1970s, of stagflation? Stagflation is when the economy is recessed yet inflation rages. Because of the downturn in the economy over the last several months combined with soaring commodities prices, it was looking like stagflation might, in fact, return. Yet, because consumer demand is weak this has the effect of keeping any increase in prices in check. As prices increase, demand will eventually diminish and cause inflationary pressures to subside.

Overall growth in the economy is by far much more inflationary than any increase in commodity prices. Commodity prices are just a small portion of overall production costs. Changes in commodity prices account for a small part of inflation exclusive of the costs of energy and food. Labor costs, which are figured to be about 75% of all costs, represent a far greater inflationary threat. However, we do not have increasing labor costs at this time in the economy.

The housing bubble and now the commodities bubble have burst and the effect is not inflationary. As a matter of fact, it is deflationary. The downward pressure on housing prices certainly is not the stuff that inflation is made of. The credit crunch we are now experiencing is one that could prevent a reviving of the economy.

We now have a situation in which lenders do not want to lend. The danger here is that the Fed is wanting to stimulate the economy while the banks are digging in their heels. This is the situation to watch at this point. It will be interesting to see how this works its way out.

A Well Reasoned Approach to Jump Starting Home Sales

Top-Down Solution
by Lawrence Yun, Chief Economist, NAR Research


The most recent data indicates that, yes, foreclosures rose again in the 4th quarter of 2007. A number of government agencies are trying to help reverse this trend. There are several policies proposed and some already being implemented to address rising foreclosures. But nearly all are attempting to alleviate the problem from the “bottom up,” rather than from the “top down.” The bottom-up approaches involve a work-out plan of current problematic loans. Let’s look at several of them.

· The FHA Secure Program offered through HUD allows borrowers to get out of their high-interest rate, subprime loans into a lower-interest rate FHA loan if they meet certain conditions. Those conditions include having some level of housing equity and having demonstrated timely mortgage payments prior to the time when interest rates reset at a higher level.

· Sheila Bair of FDIC was one of the first to call for voluntary loan remodification. Lenders' profit margins will be lower, but remodification is still better for their bottom line than a foreclosure. Recently, she called for systematic lowering of those resetting rates on 2/28 and 3/27 subprime hybrid loans.

· Henry Paulson, Treasury Secretary, called for essentially the same after bringing key financial institutions together and putting the voluntary loan restructuring into more concrete form. There are a lot of hoops a borrower has to go through to qualify for the relief, however.

· Ben Bernanke, Chairman of the Federal Reserve, has suggested lenders give a break to distressed borrowers by lowering some portion of the loan amount. A lower remaining principal will permit more manageable monthly mortgage payments for borrowers. More importantly, the write-down of the principal changes the homeowner’s position from being under water (negative housing equity) to above water. The idea is that borrowers can still make payments rather than walk away.

· Senator Chris Dodd (D-Connecticut) has proposed legislation that would permit bankruptcy judges to modify the terms of the loans in order to make payments more manageable.

· Martin Feldstein, Harvard University professor, made an intriguing proposal of immediately converting 20 percent of the existing loan balance into very low interest-rate loans. The federal government will provide the exceptionally low rates.

All of these proposals are well-intended and most will help mitigate foreclosure problems for mortgagees. But in addition to some aspects of these programs, what is also needed – and could well be far more effective – is a top-down solution: raising the housing demand. As I have written in this column previously, there exists a significant pent-up demand. What we need now is to get the home sales rolling. Rising home sales will lower housing inventory. Lower inventory will help quickly stabilize home prices. A recent Boston Fed study showed that home price movements – and not interest rate resets – are the primary determinant of foreclosures. If households have less or negative housing equity, then they have more of an incentive to default on mortgages and simply walk away.

The challenge is unleashing this pent-up demand into the marketplace. Consumer pessimism is pervasive. The raising of the loan limit on FHA and Fannie/Freddie backed loans will likely help unleash some of this demand as more households will have access to lower interest rate loans. And while lower home prices can also work to bring buyers to the market, they are no guarantee because lower prices can also add to excessive pessimism and consequently hold off buyers.

So, what do I think we should do? What is critically needed at this important point in the housing cycle is a measure to assuredly and quickly raise home buying activity. This can be accomplished by providing a home buyer tax-credit. A nationwide $5,000 tax credit (the same amount currently in existence for home buyers in Washington, D.C.) would cost the federal government $40 billion. Factoring in rising economic activity and accompanying rising tax revenue, the true cost could be minimal or even positively favorable. A reversal in the weakness in the housing market, which has been subtracting about one percentage point off GDP growth, can add $40 billion to the U.S. Treasury – essentially offsetting the cost of the tax credit. If the initial $40 billion cost is hard to swallow, how about a more targeted tax credit for only first-time home buyers? That would cost the government about $15 billion.

The ongoing subprime loan mess and related foreclosure problems are due to past lending mistakes. Current home buyers fortunately are not exposed to these “errors in judgment.” And these fresh buyers will also help save the day for existing homeowners who are either defaulting or facing foreclosure. Rising demand lifts all boats. There is a wide selection of safe mortgage products for today’s home buyers. Combine those safe mortgages with a home buyer tax-credit and we have the makings of a solid housing market recovery. Because housing nearly always leads the economy, a solid economic recovery will not be far behind.

This is one of a series of commentaries provided by the Research staff of the National Association of REALTORS®. You can find this, as well as other commentaries and articles like it on NAR's website: www.realtor.org