Good Afternoon,
It was a weird weekend with the time change…always seems to mess me up. I hope you had a good weekend and did not get messed up by it. Either way, I know I like the snow better than the rain, but at least it got a little warmer, right?
On today's call: Markets, Housing, Real Estate & Taxes part 1, Interest Rates
The Dow extended its all-time high (set last week) but the rally has been slow to continue today as economic news from China was a letdown, adding to the fire that is brewing in Congress regarding the negotiations surrounding the budget. Also, Italy’s credit rating was downgraded by Fitch, increasing investors’ concern that the financial health of the Euro is not improving. Last weeks’ unemployment numbers were the best in a long time, and as a result, the bond yields rose, pushing interest rates up again. This week, we’ll be paying attention to news from the Fed in regards to the budget as well as Friday’s consumer sentiment report. If you’re interested in the direction of the economy, you should keep an eye on these two.
In housing, Federal Reserve Governor Elizabeth Duke said she believes housing prices will continue to rise, as supply of existing homes will remain pretty tight. This isn’t earth-shattering news as it’s been reiterated by other experts and government officials lately as well. What’s interesting to note is that in their report, the Fed’s Board of Governor’s states that while a new influx of bank-owned homes hits the markets, they do not believe it will be enough to outpace demand. On the flip-side, that demand could be building even more. Right now, tight lending conditions and low demand from younger would-be homebuyers is keeping demand in check. While the tight lending conditions are probably not going anywhere anytime soon, it’s hopeful that the Gen Y buyers entering the market will eventually be in a good position to buy, and the market dynamics will change for the better.
I’ve had many clients ask me questions about the taxes they pay in regards to their home. I am not a CPA but I have enough experience with the tax side of the mortgage business and Ithought I’d relay some notes that I’ve taken about the subject, which I’ve consulted with my CPA on for clarification. This is part one of three, and involves common tax mistakes many homeowners make:
· If you escrow your taxes, don’t just deduct the amount escrowed. Make sure you use the amount listed on the 1098 from you’ll receive from the lender
· You CAN deduct points, it’s just different if you purchase vs refinance. You can deduct points in full for the year you bought the home. For a refinance, you have to deduct points over the life of the loan. It’s not much, but it’s something...
· Remember to keep track of maintenance and repair expenses. The IRS scrutinizes these numbers heavily.
· Don’t forget to pay capital gains tax on home-sale profit. You can exclude $250,000 (or $500,00 if you’re married) of any profits from taxes. There are minimum time limits for holding the property to take advantage of this. Here’s a link for more info: http://www.irs.gov/pub/irs-pdf/p523.pdf
· If you install energy-efficient items in your home, don’t miss out on the opportunity to get a 10% credit (up to $500).
· You can only deduct mortgage interest up to $1 million in mortgage debt. Those who own high-end or multiple properties, don’t claim more than this…the IRS might be calling.
Interest rates were up last week, crossing the 3.625% threshold for the 30 year fixed. What’s exciting, though, is that we’re just about up-and-running with our new Jumbo lender. Their 30 year rate with no points as of Friday was under 4%! With bonds even today, I don’t expect much to happen until perhaps the end of the week, as the consumer sentiment index is always a market mover.
Enjoy your week everyone. Please feel free to share this with your networks. My business works on recommendations from you so I appreciate your support. If you have any questions, please let me know.
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