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Tax Alert: the recently passed Housing and Economic Recovery Act contains a tax pitfall for investors and possibly move-up buyers. For investors, move-up buyers and property owners whose property has increased in value this legislature may not be an economic stimulus or economic recovery for you. The legislation may increase your taxes,so be very aware and plan around it. Changes affect:
Investors: Certain "1031" exchanges will be affected. Please consult with an attorney, a professional tax consultant or financial planner. Complete your transaction before December 31. 2008. Move-Up Buyers: If you are a move-up buyer and your personal residence has been used as a second home or rental property you will be affected. Time is short to avoid falling under the new capital gains tax law>Complete your transaction before December 31, 2008. Buyers: You do not know what the future holds. If you should suffer a temporary reverse in finances and needed to rent your home to get through the difficulty the new capital gains structure could affect you. The same is true if you should get a job transfer and converted your home into a second home or rental. It is wise to consult a financial planner or tax professional if these or other circumstances would occur. Sellers: If your personal residence has been used as a second home or has been used as a rental the change in how capital gains are calculated will affect you. You will pay capital gains taxes on a ratio basis: how many years as a personal residence vs. second home/rental. Under the old tax structure, savvy real estate professionals (and homeowners) were able to take advantage of the guidelines to help existing home owners move-up, relocate, turn their home into an investment or convert an investment property to a personal residence. How that is done and the taxes that will be paid have changed. The new tax structure will take effect on January 1, 2009. Please consult a skilled tax accountant. If you plan correctly you may be able to save thousands of dollars in taxes! Investor, buyer, and seller this new tax structure can affect you If you are considering a move which will involve converting your property to or from a personal residence to a second home or rental please be sure you work with a Realtor® who is "investor" savvy and is current with the recent tax changes. Finances are always very personal and, like homes, no two situations are exactly alike. I am not a tax attorney, tax consultant or a financial advisor. However, I do know real estate and I do know that the capital gains tax is an important issue for investors, buyers and sellers.
Investor Report: Hidden Tax Pitfall The Housing and Economic Recovery Act Housing and Economic Recovery Act of 2008 REvealed I scream, You scream, We all scream for ice cream and the dog barks! There is a new and fun festival here in Austin. I would like to announce the Second Annual Austin Ice Cream Festival which will be held this weekend. Of course, there will be lots of ice cream, popsicles and doggie ice cream, too. The festival will feature a pet friendly version of our favorite snack that will have your pet howling for more. The Ice Cream Festival not only benefits "the kid" in all of us, it also benefits several local charities such as the Austin Children's Shelter and Paws. The Festival will be centered around old fashioned family fun with activities, games, contests and live music (this is Austin, after all). Popsicle Sculptures and Popsicle Stick Races will make the day complete. Come cool off this Saturday at the Second Annual Austin Ice Cream Festival being held at Waterloo Park from 10am until 7pm. Kids under 12 are free and all kids over 12 can gain admission for a budget-friendly $2 bucks. Support local business and local charitable organizations with your scream for more ice cream.
The new Housing Bill is over 700 pages long and not written for the faint of heart. To determine what tax credits are most advantageous for you, please be sure to obtain counsel from a professional tax consultant or accountant. There have been some tax credit additions, increases and streamlining to tax programs already in existence. Many of the tax credit incentives are temporary and will end with the year 2009. There are some new tax advantages for those who desire to invest in the residential real estate market but, remember, there are time limits involved. Real estate investors will see a temporary increase in the tax credit limitations for the low-income housing tax credit program. Limits are set state-by-state and Tax credits have defined time lines. The Housing Bill has also changed the way Capital Gains are calculated and how the tax credit is applied. If you are a move-up buyer, be sure to check with a professional as to how this change would affect you. The Housing Bill offers tax credits to first time home-buyers, defined as anyone that has not owned a home in the past three years. The tax credit is a loan of sorts since it must be paid back over the next 15 years but it is an interest free. Repayment begins in 2010 in $500 increments. These payments are in the form of a "recapture tax credit". The tax credit for first time home-buyers is not a flat credit of $7,500 for all buyers during the qualifying period. It is 10% of the home's purchase price with a cap of $7,500. The tax credit was designed to stimulate home sales and to aid first time home buyers. However, it is a tax credit to be taken when you file taxes after the purchase of a home. The home must be purchased after April 9, 2008 and before June 30, 2009. At this time, there is no up front money to help you purchase a home. It is important for first time buyers, move-up buyers and investors to understand all the advantages of the new Housing Bill. The leaders of the nation designed the bill to stimulate the housing market. There are advantages to tax credits. However, finances are like real estate; very personal and no two circumstances (homes) are exactly alike. Be sure to consult a professional in the field of accounting and/or taxes. The latest economic reports this week were not very encouraging but I want to remind you that this is Austin, Texas. Texas has the strongest economy in the United States with all the major metro areas reporting job growth and lower unemployment rates. Dallas-Fort Worth, Houston, Austin and San Antonio (in that order) were named in the top 10 cities to resist a recession a few months ago by Forbes.com. Since that time, the economic reports for these metro areas has remained stable or imporved. Dallas alone has experienced the highest job growth of any city in the nation. The Austin real estate market experiened a slower market in 2007 and the beginning of 2008 over the blockbuster year of 2006. However, home values did not decrease. Austin, Texas home values have remained stable or increased. Home sales began rebounding in April 2008, although it is still a buyer's market with a large inventory of homes. There is so much positive news (nationwide) that is not widely reported and there is an upside to every downside report, especially here in Texas . Ninety percent of the members of the National Association of Business Economics are reporting that there will not be a recession and the economy will experience growth, albeit a slow growth. "Corporate America" may not be making the same profits as last year, but corporations reported profits in excess of 1.5 trillion dollars in the last quarter. Do not let the media or the fear of "things to come" rob you of the opportunity to own your own home. Austin home prices are still affordable and mortgage interest rates are still lower than last year's rates. If you do not have perfect credit or a 20% down payment, there is still a loan option for you - FHA. FHA offers fixed interest rates (some of the lowest on the mortgage market). FHA also offers flexible guidelines with regard to credit. FHA has recently increased their loan limits (expires 12/31/2008 ) which could increase your purchasing ability. FHA also offers home loans with only 3% down required; part of these funds can be in the form of a gift from a family member, a down payment assistance program or the seller. Get a step ahead of the inevitable inflation that will come into play in the years ahead. Now is the time to determine what your housing budget will be for the next 15-30 years. When you choose a fixed mortgage rate, your house payment will not change. Inflation has not yet affected the real estate market. Once your home is paid off (a 30 year loan can be paid off in as little as 15 years without a major blow to the budget), you will be living rent free in a home that has more than doubled in value. According to the experts, as the U.S. housing market improves, so will consumer confidence and the weakening dollar. Be part of the national economy recovery; become a homeowner. One of the best markets to invest in is the Austin real estate market. The Austin real market has remained strong with prices increasing while many metro areas in the country experienced a downturn. The Austin economy has remained strong and gotten stronger while many metro areas are experiencing a downturn in job growth and stability. Texas was recently named the best place to do business in the nation by CNBC. According to the Real Estate Center at Texas A&M University the Texas economy will remain strong in all of the Texas major metro areas until 2030. Austin was named #3 in the list of recession proof cities published by Forbes.com (Austin Stands Strong). All of these factors make for good reasons to invest now in the "American Dream", homeownership. Now there is a new factor in the real estate market which makes buying a home in Austin a wise choice, the rising price of fuel. Location has always been a real estate mantra and with the effect that the high gas prices are having on people's budget, location may become even more important. The suburbs may become passé and city living the next big thing. Real estate agents are already getting phone calls from those that want to move back to Austin from the suburbs to avoid the long commutes and high fuel costs. The money, suburbanites, once saved in mortgage payments by purchasing less expensive homes in the suburbs is now being eaten up by gas prices. Homes in the city are becoming more attractive to suburbanites. Although, the Feds are predicting that the inflation rate will slow down in the next few months; we will have to wait and see if it slows down enough to avoid an exodus from the suburban areas. Based on today's gas prices an Austin home is probably a wiser investment for the future than one in the outlying areas. Humans love a great fireworks show but dogs and cats don't. The very things that bring out the oohs and aah's in us are the same things that cause pets to go into panic mode. It is the instinctive nature of animals to escape from the bright lights and booming sounds overhead. In the animal's panic all they want to do is escape. Pets have been known to break through fences and cages that had previously kept them safe and contained. This Fourth of July make sure your pet is wearing an identification tag with your current address and phone number. If your pet is registered with a microchip company ensure that the information on file is correct. Unless you already know that your pet will not react negatively; taking your pet with you to a fireworks display may not be your wisest choice. The best option is to leave your pet inside your home. Close your blinds and leave the radio or television on. Tuning to music, such as classical, romantic or even soft rock can often have a calming effect on animals. Remember, even if your pet is used to living in the outdoors it is not used to the bright flashes or sounds of fireworks. Should your pet panic and bolt begin your search of the area immediately! If you are entering someone else's yard be sure to ask permission (you need to keep yourself safe if you are going to find your pet). If you do not find your cat or dog please put up large visible signs (with a photo is best) in the area the animal became lost in and check with the nearest animal shelter. Don't give up! When animals become panicked and lost they may hide from humans for a week or longer. The Austin Board of REALTORS® Multiple Listing Service (MLS) has released its latest report on the market conditions in Austin . Market activity, although slower than last year, has definitely picked up. Activity is expected to increase and become quite "hot" by mid 2009. Austin real estate is currently undervalued by 10%. This may change with increased activity. When the competition for housing heats up, so will home prices; buying now may save you thousands later. The Austin economy is very strong and job growth is up. Both of theses trends are expected to continue. Predictions are that we will continue to see a strong economy in Texas until the year 2030! Austin consistently ranks as one of the fastest-growing metro areas in the nation. More jobs mean more people and a demand for housing whether purchasing or renting. As demand rises, the law of "supply and demand" will increase home prices; although the predictions for Texas ' future is that housing will remain affordable in comparison to the rest of the nation. As home prices and interest rates increase, your buying power will decrease. Even an increase of a few thousand dollars in sales prices and a quarter percent in the interest rates will mean tens of thousand of dollars lost in terms of what you are able to buy. Interest rates are expected to trend upward and The Feds are expected to increase the interest rates by a quarter percent before the end of the year. A month ago a home selling for $210,000 would sell for about $212,000 today. Interest rates in May were 5.8%, now the interest rate is at 6.3%. The house payment in May would have been about $1150. With current rates and a value of $212,000, that house payment has increased by almost a $100! Not only has the payment for the house gone up but your buying power (due to the interest rate) has been reduced about $20,000. Based on current interest rates you can no longer buy the same house. First home buyer, move-up buyer or investor buying now not only may save you thousands in the future but it will also give you the opportunity to maximize your dollar. Looking for an investment opportunity? Consider buying rental property in Austin. All those new workers moving to Austin for job opportunities will not be purchasing a home. Property selling for $200,000 will increase in value to over $600,000 by the year 2038. (rate of 1% in value per year). As a landlord, you are able to qualify for some tax credits and you will realize a monthly positive cash flow which will increase in time). If you are considering real estate as an investment, you should always consult a professional. Please contact me for assistance. For information, availability and homes whether as a personal residence or investment, give me a call.
Forbes.com has ranked Austin as the 7th on its America's Best Cities for Outdoors list. One of the reasons has to be one of my favorite places, Town Lake. Town Lake is one of the most popular places in all of Austin to enjoy the great outdoors. Town Lake is located in the heart of downtown Austin. The lake is formed by two dams on the Colorado River, the Tom Miller Dam located upstream and the Mansfield Dam, downstream. Town Lake is comprised of several parks greenbelts and play areas. The most popular park in Austin is Zilker Metropolitan Park which is the largest of all the Town Lake Parks. Zilker Park is located on the south side of the lake. The park is also referred to as Zilker, this may be a little confusing for outsiders as there are actually two Zilker Parks. One is the Metropolitan Park and the other is a small city park. For those not familiar with Austin, Town Lake refers to the lake and to all the surrounding parks. Zilker refers to the Zilker Metropolitan Park. Zilker Metropolitan Park is amazingly beautiful with miles of hiking and biking trails. The park features the beautiful UMLAUME Sculpture Gardens, Austin Area Garden Center, the Botanical Gardens, Zilker Hillside Theater and a miniature train ride, the Zilker Eagle. You will also find the Austin Nature and Science Center, a popular place for young and old to visit, you will find so much to do here. The main features of the center are botany, natural history and science exhibits. There is also a living nature museum which is home to injured or orphaned native wildlife and a Birds of Prey aviary. Be sure to walk the Eco-Detective Trail while visiting the center. Zilker's Austin Area Garden Center features an oriental garden complimented by waterfalls and ponds, a rose garden and a butterfly trail. There is also a small pioneer village and a xeriscape garden which displays water conversation principles. Dinosaur tracks were discovered here in 1992. In the heart of Zilker is The Barton Springs Bathhouse. Here you will find Splash! which is a simulated limestone cave with several multimedia and interactive exhibits. Another one of Austinites' favorites, located in the center of Zilker Park is the Barton Creek Swimming Pool. The pool is fed by a 68 degree cool, clear, natural spring and is over 1,000 feet long (that is longer than 3 football fields!). Zilker also features a rowing dock where canoes and kayaks can be rented for a leisurely ride on the lake. Town Lake Metropolitan Park is located on the southeast banks of the Colorado below the Miller Dam. The Park is comprised of several smaller parks (Auditorium Shores, Butler Shores, Festival Beach, Holly Shores, Lakeshore, Lamar Beach, Longhorn Shores, Norwood Tract, Shoal Beach and Waller Beach) but is usually referred to as a whole, Town Lake. The park offers great views of the Austin skyline and Town Lake. On the south side of Town is Auditorium Shores, as its name indicates this area is home to many concerts as well as several of Austin' large events. Town Lake Park hosts some of Austin's favorite hiking and biking trails. The main trail is a 10 mile gravel pathway which circles the lake. You will find 17 sports fields within the Town Lake Park where you can play anything from baseball to rugby. There are several restaurants nearby and of course, live music. There is so much more I could say but I don't think I can remember everything there is to see and do, and give it all justice. Each park and greenbelt offers something unique as well as its own individual beauty. I will end by letting you know that a row on the beautiful waters of Town Lake makes you forget that you are in the middle of the city. If you are not into rowing take a cruise by boat or ride on an old fashion Paddle Wheeler. There are day cruises, sunset cruises and even bat-watching excursions. Well, I hope you are beginning to see why we love Town Lake and why Forbes has found us to be one of the best cities in outdoor living. Most cities cannot match the beauty of our Town Lake, its many parks, exhibits and uniqueness anywhere within their city boundaries; but here in Austin, we have it all in the heart of the city. Town Lake Parks: Barton Creek Greenbelt East, Barton Creek Greenbelt West, Barton Creek Wilderness Park, Barton Hills Playground, Butler District Park, Colorado River Park, Eilers (Deep Eddy), Gaines Creek Greenbelt, Metz Park, Palm Park, Red Bud Isle, Sanchez Playground, Town Lake Metropolitan Park, Zilker Metropolitan Park and Zilker Park. Everyone Finds Austin Real Estate on their Best Place List Austin, as well as the state of Texas, has fared very well on many "best place" lists. Another survey by BizJournals.com, has named Austin as #2 on its list of best places for young adults. The main factors looked at in this survey were based on job opportunities, income levels and quality of life. BizJournals.com is being proven correct by the many young professionals who have moved back to the Austin area for those very reasons. These buyers are the 30-somethings that moved away but are now returning home. The "returning buyers" have chosen such areas as Downtown Austin, South Lamar, Hyde Park, South Congress and East Central Austin as their favorite areas to buy a home. They are very savvy buyers and prefer homes that feature green living as well as convenience to parks, green spaces, and shopping. These buyers want to be close to mass transit or have the ability to walk or bike to shops and work. Some of these 30-somethings are from areas such as Seattle and Portland where this way of life is quite common. The Baby Boomer generation is also moving to Austin for its lifestyle, climate and affordability. While these buyers may not be as interested in green living, they are definitely interested in living in green areas. In light of increasing gas prices and their fixed income, proximity to shopping and other conveniences has also become an area of importance to them. Investors are finding the Austin area a very good place to invest their real estate dollar. Although, Austin is not experiencing a depressed market and prices are holding steady these same groups, Baby Boomers, Young Professionals and "returning buyers", will increase the demand in the rental market. No matter where the buyer is coming from, they are coming because Austin is one of the Best Places to live in the nation. Time for an update on Austin Real Estate. In early December I told you that we were still in a good market here in Austin, Texas (see my December 10 blog ‘Tis the Season to be Jolly - There's no bubbles but only water in Austin! . That statement was my opinion based on what I know about the Austin real estate market. Well, in December our sales fell off. So, you may be hearing some buzz about the Austin market not fairing so well. You may be listening to all the media hype on real estate bubble burst and the sad situation the real estate market is in. Lets look at some facts. 2005 and 2006 were record breaking years for Austin Real Estate. So, if not quite as many homes have sold recently in comparision to the same month in the last three years, that is not an indication of a market slow down or impending doom. Austin real estate is still a good investment. We have been rated as not only one of the best places to live, but also one of the top 10 cities to invest in real estate either as an investor or a home owner for the year 2008. This is a great market. Sellers are still able to sell in a reasonable timeframe. A great market is 30 days or less. A strong market is 60-90 days. A declining or Buyer's market is 6 months or more. Here in Austin , depending on the neighborhood, our timeframe ranges in the great and strong days on market. Depending on location, sellers are still able to sell their homes for more than what they purchased them. Austin is seeing anywhere from 7% to 20% increase in home value once again. Sales may have been off slightly in December from the record breaking years, but they were certainly back up there in February. Ahhh, I was right after all. It is a great market in Austin and it is still the the season to be jolly! This is great market. There is a large pool of qualified buyers from the Boomerang group (Texans returning to their home state), first time buyers, those relocating to the Austin area to real estate investors. This is a great market. Buyers are still able to get loans at low interest rates. We may see another drop in interest rates shortly. This is a great market. Buyers have a good selection of standing inventory. This is a great market. The Austin real estate market offers one of the best selections of undervalued homes in America . Undervalued simply means affordability for buyers and that our market is no where near over inflated prices. My report does not give you all the statistical facts and figures but it does give you the facts. It is a great market for buyers and sellers in Austin Texas Real Estate. This fact is unusual in itself but I will tell you more about that next week. Austin is still one of the most desirable areas in the country due to our weather, strong economic base, low unemployment and some of the best schools in the nation. If you are considering a real estate investment email me. I will be glad to help you determine your buying power and the best area for you to invest your real estate dollar whether for your own home or as an investment for the future. To visit my website for more about Austin Real Estate Want to learn more about the Austin Economy? 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