Housing supply falls further, feeding prices

Ask anyone trying to buy a home today, and the vast majority will launch into a story about a bidding war. Demand for housing has returned, but housing supply has not, and the numbers are only getting worse. The supply of homes for sale nationally in June fell 6.5 percent from a year ago, according to a new report from Zillow, a real estate listing and analytics company."Finding a house is the last hurdle for many buyers who have saved a down payment and gotten pre-approved for a mortgage, but low inventory levels like those we're seeing across the country can bring the homebuying process to a screeching halt," said Stan Humphries, chief economist at Zillow. "In many markets, there just isn't a lot to choose from in terms of homes on the market." The bigger the city, the bigger the problem. Inventory fell in 19 of the nation's largest metropolitan areas. Supplies are also falling the most in the lower price ranges, making it even more difficult for already cash-strapped first-time buyers to get into home ownership. The reasons for tight supply are manifold: Homebuilders are putting up single family homes at a far slower pace than historical norms. They cite a shortage of labor for at least some of that weakness, but they also are not seeing strong demand, due to their higher prices.Another reason is negative equity. Millions of homeowners still owe more on their mortgages than their homes are worth, or they don't have enough equity in their homes to afford to move up, leaving them unable to list their homes for sale. Still other potential move-up buyers are afraid they won't be able to find a home to buy, so they stay where they are. Supply is also directly connected to price. Supplies are lowest in markets where prices continue to rise, but supply is actually starting to ease in markets where home prices have flattened. Take Washington, D.C., for example. Home prices are flat from a year ago, and inventory is now up nearly 19 percent, according to Zillow. In Dallas, however, where prices are still rising, up 12.5 percent from a year ago, inventory is down nearly 20 percent. "Sellers tend to want to hang in and get the last juice out of the orange," said Humphries. "If you think you might see 10 percent appreciation over the next year, is it rational to move where you might squeeze more out of the market? No."That seller psychology is only feeding the problem in some of the hottest markets. Low inventory only pushes prices higher, and makes more sellers want to wait. That in turn pushes supply lower, as housing demand rises. In addition, higher rents are keeping more first-time buyers from saving for a down payment. "If we can get additional increase in supply, then price increases will begin to flatten out, which will be good for the economy, good for many first time buyers, but as long as we have limited supply, and that's what we have today, then prices inevitably will continue to rise," said Lawrence Yun, chief economist for the National Association of Realtors.

2014 Holiday Party Success

Congrats to All the CENTURY 21 JRS Realty agents that received awards at the annual CENTURY 21 JRS Realty Holiday Party. At this years Holiday party Khem Persaud, Eddie Kefalas, and Ana Montes received top honors for sales achievement. Congratulations to all CENTURY 21 JRS Realty agents for making people happy again this year.

A HUGE THANK YOU to the staff of lady's that keep the office going behind the scenes. Betty, Zakiyya, Jennifer, and Melissa are the best administrative assistants any business owner could ask for. THANK YOU ALL!!!!!!!

It is about to get easier to get a Loan

For years now, if you didn't have near perfect credit and a hefty 20% down payment, chances were slim that lenders would give you a mortgage. But that's all about to change. That's because Fannie Mae and Freddie Mac, the two government-backed mortgage giants that backstop a majority of all mortgages, have put new lending guidelines in place that should make it easier for borrowers to secure loans. Not only are the two agencies lowering downpayment requirements and making it easier for loans to be classified as qualified mortgages, but more importantly, they have clarified when lenders will be on the hook if borrowers default. In the past, Fannie and Freddie have been able to force lenders to buy back loans that have defaulted soon after it was issued, if any mistakes were made in the paperwork or if there was borrower fraud. "Lenders have been real concerned about these buybacks," said Doug Lebda, CEO of LendingTree. "If problems arise with loans, the [Fannie/Freddie] guarantee often fails when lenders need it the most." Related: The 3% down payment mortgage makes a comeback Mel Watt, the head of the Federal Housing Finance Agency, acknowledged that the previous policy made it hard for lenders to understand exactly when Fannie Mae or Freddie Mac would require the banks to repurchase loans. Under the new rules, any loans with no missed payments for 36 consecutive months after they were first issued will be backed by Freddie or Fannie should they default. The agencies will also allow two missed payments in the first 36 months without forcing borrowers into foreclosure.And if private mortgage insurance, which is required for all low downpayment mortgages, is rescinded, say due to errors made in the underwriting process, lenders will not automatically be required to repurchase the loans. "That makes the Fannie/Freddie guarantees more like real insurance," said Lebda. According to Lawrence Yun, chief economist for the National Association of Realtors, the buyback issue has been "the number one hindrance to mortgage lending lately. If it disappears, it would be a big boost to mortgage lending." Freddie and Fannie have also said they will start backing 3% down loans. Borrowers can currently get 3.5% down loans from the FHA, although they require borrowers to pay mortgage insurance premiums for the life of their loans. The new low down payment loans should help boost homebuying among low-income and first-time homebuyers, who have been conspicuously absent from the housing market over the past year. Lenders already seem to be loosening up a bit. Mark Palim, who oversees economic and strategic research at Fannie Mae, said average credit scores for approved loan applications have dropped slightly over the past few months and lenders are doling out loans with lower downpayments as well. According to the Federal Reserve, nearly 14% of senior loan officers said their banks had gotten less strict in the three months ended in October. Of course, lenders are not expected to return to the lax underwriting standards of the boom years. Banks are much more careful these days, making sure that all mortgages are fully documented, said Palim. They don't want to look irresponsible, or worse, predatory. "They're very concerned about reputational risk," he said.

Inventory Down, Prices on the Rise

Home prices will rise in 2014 but at a slower, more steady pace compared with historical trends. The housing recovery has pushed up home prices nearly everywhere. In the past year, home prices rose in 225 of the 276 cities tracked by Clear Capital, a provider of real estate data and analysis. (See how home prices are shifting in 276 metro areas.) Prices nationwide increased by 10.9 percent, pushing the median price for existing homes up by $30,000, to $215,000. For people who have waited to sell their home or refinance their mortgage, that's good news. (Bing: How are interest rates looking this week?) Rising home prices in Seattle enabled Mike and Kristin Litke to refinance their first mortgage last summer and pay off a second mortgage that had an 8.2 percent interest rate. The Litkes, who bought their three-bedroom, 1.5-bath home for $512,500 in 2007 at the peak of Seattle's housing market, had used the second mortgage to avoid paying private mortgage insurance. In 2010, just as home prices in the area hit a trough, they refinanced their first mortgage to a 30-year fixed rate of 4.375 percent but were stuck with the second mortgage because they didn't have enough equity to do a "cash-out" refi. This time, however, their home appraised for $521,000, allowing them to refinance into one 30-year, fixed-rate mortgage of $416,800 at 4.25 percent. They have reduced their monthly payment by $360, giving them some wiggle room in their budget and providing an infusion of college-savings funds for their kids: Stephen, 3½, and Stella, 10 months. What's ahead In 2013, a sense of urgency drove traditional buyers hoping to take advantage of still-affordable home prices and historically low mortgage rates. Buyers found selection limited and were often forced into bidding wars with investors and other buyers who paid cash. Sellers reaped the rewards in terms of quick sales, often above the asking price. Almost half of the cities tracked by Clear Capital experienced double-digit increases in home prices, led by Las Vegas, with a gain of 32 percent. Such spikes reflected a continuing "correction to the overcorrection," says Alex Villacorta, vice-president of research and analytics for Clear Capital. Buyers and investors rushed in to snap up homes with prices that had fallen too far. Homes continue to be affordable, despite recent run-ups — on average, prices are still 31.5 percent below their 2006 peak. The percentage of monthly family income consumed by a mortgage payment (assuming a mortgage rate of 4.1 percent) is just 15.6 percent, on average, compared with 23.5 percent in mid 2006. Home affordability calculator Combined annual income $ Other monthly obligations $ Cash for down payment $ "Houses are very cheap," says David Stiff, principal economist at CoreLogic, a property and mortgage-data analytics company. Market observers agree that home prices will rise in 2014, but at a slower, more steady pace compared with historical trends. Clear Capital forecasts that home prices nationally will rise by 3 percent to 5 percent in 2014, about the historical average. Kiplinger expects an increase of 4 percent. "The most notable thing about 2014 will be how un-notable 2014 is," Villacorta says. Meanwhile, the Conference Board, a nonprofit association of businesses, found that the percentage of consumers who intend to buy a home in the next six months was the highest since 2000. Adding to the push: pent-up demand among young people who, hampered by lack of jobs or insufficient income, have been living in their parents' basements or sharing apartments with roommates. Celia Chen, a housing analyst with Moody's Analytics, says Moody's expects the economy to expand enough in the coming year to enable young people to begin moving out. They'll probably rent first, but low vacancy rates and higher rents will prompt some renters to move on to homeownership. 'Listed': What young homebuyers really want As home prices continue to rise, more owners who had been underwater — meaning that they owed more on their mortgage than their home was worth — will emerge from the sidelines and start selling and buying homes. CoreLogic reports that almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid 2013. Nevada, Florida, Arizona, Michigan and Georgia have the highest shares of underwater homeowners. A sellers market In the past year, sales of existing homes and condos rose by 11 percent, to 5.29 million — almost the highest level in four years. The National Association of Realtors expects sales to remain about the same in 2014. Sales nationally have increased across all regions and in all but one price category, signaling a broad-based recovery. MSN Money: Getting a mortgage is about to get harder Although sales of entry-level homes (priced at $100,000 or less) have fallen by almost half in the past year in the West, they're still rising in the Northeast, where the job recovery has lagged behind other regions. Sales of homes priced between $750,000 and $1 million have risen the most. "A consistent stock market recovery for a prolonged period has opened up the wallets of upper-income homeowners," says Lawrence Yun, chief economist for the National Association of Realtors. Nationally, the supply of homes for sale stands at five months' worth. (Months' supply is a measurement of how long it would take to sell everything at the current pace of sales. A market balanced between buyers and sellers has about six months' supply of homes.) The current level slightly favors sellers, but in many cities inventory is much tighter. For example, the Washington, D.C., suburbs of Montgomery County, Md., and Northern Virginia had about two months' supply in September. Yun says the housing market has moved toward a shortage that will persist through 2014. Why is inventory low? In some cities, institutional investors have been scooping up properties to rent out. Plus, builders cut way back on new-home construction during the bust, and homeowners who bought at the top of the market are still reluctant to sell until they can recoup more of their investment. Some are still underwater, unable to pay off their mortgage with what they'd get for their home. results by Bing Bing Search:Calculating Your Homebuying CostsCalculating Your Homebuying Costs Home Buying Closing Costs How to Estimate Closing Costs home-buying-costs More results from Bing:web | videos | imagesIn Oakland County, Mich., in suburban Detroit, agent Melanie Bishop says home prices fell so far during the economic downturn that even longtime homeowners reaped little or no profit when they sold. But with the housing market's rebound, sellers' prospects have improved. She recently helped Corey and Suzy MacDonald sell the four-bedroom, 2.5-bath home in West Bloomfield that they bought in late 2006 for $272,000. In the spring of 2012, Corey MacDonald became self-employed, and the couple decided to relocate to Florida. They listed their home for sale at $265,000, just enough to pay off their mortgage and expenses. The best offer they received was $245,000, so they decided to postpone their move and try again later. Last summer, they listed the home for sale at $289,900. On the first day, they received an offer of $310,000. "It was a perfect deal," MacDonald says. He ultimately took a job in Atlanta, and the couple used the proceeds from their Michigan sale to put down 20 percent on their next home. The influence of investors will wane as the low-hanging fruit (including foreclosures) disappears in 2014. Once, whole cities were ripe for the picking — such as Cape Coral, Fla., and Phoenix in 2012, as well as Las Vegas and Atlanta in 2013 — but investors must now dig deeper at the neighborhood level, says Villacorta. That's a job probably best suited to smaller numbers of local investors who know their markets best. 'Listed': Homebuilder confidence flat amid rising construction costs Where will new supply come from? Most people who list their homes for sale expect to buy another one, so it's a wash in terms of net inventory. According to the National Association of Home Builders, whose members retrenched during the bust, just less than half as many homes were started this year as in a normal market. NAHB forecasts that a normal pace of housing starts won't resume until late 2015. Tight credit, land and labor, as well as rising costs for materials, are constraining builders. Distressed properties are still adding to the supply of homes nationally, but foreclosure filings are falling. Fewer homeowners are losing their homes as the economy improves, home prices (and home equity) rise, and lenders agree to more short sales (homes sold for less than their owners owe on their mortgages). Slide show: 5 tips to ensure your short sale succeeds "We're in the home stretch of getting through the foreclosure crisis," says Daren Blomquist, vice-president at RealtyTrac, which monitors the foreclosure market. "But we won't cross the finish line, with filings back to pre-crisis level, until early 2015."

What to Do After A Flood

After flood waters subside, document, work with your insurer, and clean up safely. Whether a flood is caused by ground water, falling water, or home water system malfunction, there are some best practices you’ll need to employ within the first 24 hours after the flood to ensure the safety of your home and family and give you the best outcome possible with your insurance company. Avoid additional risks If the flood was serious enough for you to leave your home, be sure you stay safe upon your return. The Federal Emergency Management Agency warns that you should check for any visible structural damage, such as warping, loosened or cracked foundation elements, cracks, and holes before entering the home and contact utility companies if you suspect damage to water, gas, electric, and sewer lines. In addition, it’s important to have a working flashlight and turn off all water and electrical sources within the home, says Dr. Maurice A. Ramirez, author of The Complete Idiot’s Guide to Disaster Preparedness. Even if the power isn’t operational, it’s a good idea to go to your fuse box and turn off the main, plus all of the individual fuse connections. That way, if the power is reactivated, you’re not at risk for mixing standing water and electricity. Take pictures Before you remove any water or make any repairs, fully document the damage for your insurer by taking photos or video. Digital versions are best, says Ramirez, because they can be stored electronically and easily copied. If you start removing water or making repairs before you photograph the damage, you could potentially decrease the extent of your coverage, he says. Protect your health Even if the water in your home is clear, it could be contaminated by sewage or household chemicals. Ramirez recommends wearing waders, hip- or waist-high waterproof boots. In addition, wear rubber gloves to remove water-damaged possessions and to avoid contaminants, Ramirez notes. Be sure to throw out any food that may have come into contact with flood waters. FEMA recommends boiling water until authorities declare the water supply is safe. Call your insurance company Since you should notify your insurer soon as possible after the flood, it’s a good idea to keep your insurance company and local agent’s phone number in your always-ready emergency bag. (Note that the NFIP works through private insurance companies, so you contact your insurer just as you would for any other type of claim). In cases where a flood has affected a region or community, your agent may be busy handling his or her own flood issues. In that case, contact the insurance company’s headquarters. Since groundwater flood damage typically isn’t covered by conventional homeowners insurance policies, you’ll need to work with your insurer to determine the cause of the flood and the extent of your coverage. Advise your insurance representative of the state of your home and any repairs you intend to do immediately. Be sure to follow the insurance company’s direction about whether or not to wait for an adjuster to inspect the property before making repairs, says Ramirez. Document the damage and conversations at every stage of the process. What can you expect in terms of time to get back to normal? It could be as little as one week if the claim and clean up is minimal to five to six months if you’re working with an insurance adjustor and contractor to complete extensive repairs. Find out if you’re in a disaster area Once a region has been officially declared a “disaster area” by government authorities, property owners have access to increased resources, including public services to protect and remediate the area. In addition, you may have access to financial assistance. Your insurance company will have additional information on this or you can contact FEMA directly. Remove water Once you get the OK from your insurer to remove the water, use a sump pump, available from most hardware or home supply stores for $150 to $500, and a wet vac ($40 to $130). Ramirez cautions that water is heavy—a cubic foot weight 10 lbs.—so be careful not to injure yourself, especially if you’re carrying buckets of water up and down stairs. Open doors and windows to allow fresh air to circulate so long as that won’t allow in more water. Mitigate mold damage Mold can develop within 24 to 48 hours of a flood, says Ashley Small of FEMA, so remove wet contents, including carpeting and bedding, as soon as possible. If an item has been wet for less than 48 hours, it may be salvageable. However, you’ll need to decide whether it holds enough monetary or sentimental value to try to do so. And notify your insurance company before removing items to ensure that you’re not affecting coverage. Always photograph the flood-soaked items. Rugs, for example, may be dried and then cleaned professionally, which could cost $100 to $500 or more, depending on the size and number. Large pieces of furniture that are saturated will likely be difficult to dry effectively, and should often be discarded. Mold growth can be controlled on surfaces by cleaning with a non-ammonia detergent or pine oil cleaner and disinfecting with a 10% bleach solution. (Caution: Never mix ammonia and bleach products, as the resulting fumes can be highly toxic.) Always test this solution on a small area of the item or area you’re cleaning to be sure it doesn’t cause staining or fading. Take photographs before removing wet wallboards and baseboards because insurers will want to see the height of any water damage to walls. Carefully poke holes at floor level in the drywall to allow water trapped behind it to escape. You may also wish to hire a flood restoration service—you can find pros under “Flood” or “Disaster recovery” in your local phone book, or check with the Better Business Bureau, local Chamber of Commerce, or contractor recommendation sites, such as Angieslist.com or MerchantCircle.com. Look for those with Institute of Inspection, Cleaning, and Restoration Certification. Secure the property As the homeowner, it’s your responsibility to secure the property so that no additional damage occurs. Put boards over broken windows and secure a tarp as protection if the roof has been damaged. Again, take photographs to prove to the insurance company that you have done everything possible to protect your home against further damage. If the home is habitable, take precautions to keep yourself and your family safe from injury. Use flashlights to move around dark rooms, for example. If the home isn’t habitable, don’t try to stay there. Move to a shelter or alternate location. Consult your insurer to find out what provisions the company will make for temporary housing while your home is being repaired. Read more: http://www.houselogic.com/home-advice/disaster-insurance/what-do-first-24-hours-after-flood/#ixzz2MIaMT98r

Consumer confidence, home sales up

MoneyWatch) Reports out today show increases in consumer confidence and home sales, further evidence Americans are focusing more on an improving economy than the drastic, across-the-board "sequestration" cuts slated to take effect Friday. The Conference Board Consumer-Confidence Index rose to 69.6 in February, the highest level in three months and an 11 point increase over January's 58.4. The rebound is the result of consumers coming to terms with the rise in payroll taxes which took place in January, according to Lynn Franco of the Conference Board. As sequester looms public attention fades U.S. housing market poised to take-off this year Home prices post healthy gain in December "Consumer confidence rebounded in February as the shock effect caused by the fiscal cliff uncertainty and payroll tax cuts appears to have abated," says Franco, director of economic indicators at The Conference Board. "Consumers' assessment of current business and labor market conditions is more positive than last month. Looking ahead, consumers are cautiously optimistic about the outlook for business and labor market conditions. Income expectations, which had turned rather negative last month, have improved modestly." Modestly is clearly the governing word here. Even with February's sharp rebound confidence remains relatively low -- generally when the economy is growing at a good rate, levels are at least 90. Also, analysts remain concerned that confidence could drop again, even if looming government budget cuts don't happen. "The latest increase presumably reflects the upward trend in equity prices seen during the survey period, which has gone into reverse in recent days," says Amna Asaf of Capital Economics. "It is possible that confidence will drop back in the coming months. Since the cutoff date for this survey, which was mid-February, gasoline prices have risen by an additional 10 cents a gallon, while equity prices are below their five-year high levels." However, the continuing recovery in the housing market may further boost that confidence. Last month, new-home sales jumped to the highest level since July 2008. With the month's supply of houses on the market at its lowest since March 2005, current home owners are also seeing a rise in home prices. The Commerce Department said Tuesday that new-home sales rose nearly 16 percent in January to a seasonally adjusted annual rate of 437,000. The percentage increase was the largest in nearly 20 years. And December's sales were revised higher to 378,000 from 369,000. Steady job creation and near-record-low mortgage rates are spurring more Americans to buy houses. In addition, the number of previously occupied homes for sale is at a 13-year low; all of which is increasing demand for new homes. In 2012, builders began construction on the most homes in four years. Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the National Association of Homebuilders. The increase in home building has helped boost construction hiring. The industry has gained 98,000 jobs since September, the best stretch since the spring of 2006. Still, the increases in new-home sales are coming from depressed levels. Sales plummeted to a record low in 2011. And sales are still well below the 700,000 annual level economists considered healthy.

Courage

When the burden grows heavy, and rough is the way, When you falter and slip, and it isn't your day, And your best doesn't measure to what is required, When you know in your heart that you're fast growing tired, With the odds all against you, there's one thing to do: That is, call on your courage and see the thing through. Who battles for victory ventures defeat. Misfortune is something we all have to meet ; Take the loss with the grace you would take in the gain. When things go against you, don't whine or complain; Just call on your courage and grin if you can. Though you fail to succeed, do not fail as a man. There are dark days and stormy, which come to us all, When about us in ruin our hopes seem to fall. But stand to whatever you happen to meet— We must all drink the bitter as well as the sweet. And the test of your courage is: What do you do In the hour when reverses are coming to you. Never changed is the battle by curse or regret, Though you whimper and whine, still the end must be met And who fights a good fight, though he struggle in vain, Shall have many a vict'ry to pay for his pain. So take your reverses as part of the plan Which God has devised for creating a man. Courage-By Edgar A Guest

How to Become a Top Realtor in Your Area

If you have recently begun a career in real estate, you should know that things are not always what they seem. The top producer in a company may make it look easy, but the fact is a career in real estate is not so simple. The top producers did not get there by luck. They took the necessary steps to put them at the top. These steps are not always easy to figure out, however, the following information will help you to become a top producing real estate professional. Get your systems in place. This means your website, database system, assistant, branding material, promotional material, vendors, follow-up system, marketing strategy, farming area, etc. Let us just talk about a few Farming is a term that is used in real estate that simply means an area that is your territory. Many real estate agencies will allow you to choose the area in which you wish to concentrate on. It might be in your neighborhood or it could be in an affluent section across town. The farming technique will allow you to be known in that neighborhood as the real estate agent to go to. Many wonder how big their farm should be. This is entirely up to you and how well you want to do. If you farm an area of 100 homes, you may get a couple of listings every couple of months. Farm an area of 1000 or more homes and you will probably end up with 3-4 every couple of months. The more homes you farm, the better your chances are. The thing to remember is it takes repetition and time to create you as a household name but it will happen! Another method that top producing real estate agents use is branding. Branding is the process of applying repetition and consistency in your business and leading potential clients to believe you are the best in the business and thereby, the only one to call when it comes time to selling or buying real estate. The key to branding is to invoke this brand in everything you do and make sure you back up your brand by providing excellent service. The fact is branding can and will eliminate your need to the more traditional marketing. It is a slower process, but if done correctly, will last you throughout your career in real estate. The outcome of branding is that when anybody, especially those in your targeted market, thinks about real estate, they will immediately think of you. In their eyes, the only one to call is you. One sign of a successful real estate agent is the assistant. Many top producing agents find themselves to be more effective by hiring a personal assistant to handle the time-consuming aspects of their business. Your assistant should be handling items that take up too much of your time, such as advertising, staying in touch with past clients, mailings, transaction management, etc. It is also wise to make a list of the skills you lack, such as technology skills on the computer, and hire an assistant who has better skills than you do in these areas. If you do not have time to train an assistant or you just do not want the liability you should hire a Certified Virtual Assistant (CVA). These, of course, are only a few of the techniques and methods used by top producing real estate agents. To be successful, you must have a dedication to providing excellent service to your clients and you must enjoy what you are doing. Helping someone to fulfill their dream of home ownership is one reason why many agents become top producers. To become a top producer, you simply have to want it and commit to it by taking the required steps.

Apartment, Condo Market Heats Up

For the sixth consecutive quarter, the apartment and condo housing market continued to show signs of improvement.

The Multifamily Production Index, released by the National Association of Home Builders, measures builder and developer sentiment about current market conditions in the sector. The index reached 48.9 in the fourth quarter — out of a scale up to 100 — and reached its highest reading since the fourth quarter of 2005.

"The apartment and condo sector continues to be a bright spot in the housing market, with the overall index at its highest level in six years," says David Crowe, NAHB’s chief economist. "The rental components have been the driving force behind the increased index level. And although the for-sale component remains weaker, it is still double what it was just six quarters ago."

Still, the improvements are met with caution. Builders warn about the ongoing difficulty developers have faced in obtaining credit to finance development of new apartments as a major roadblock.

What Do Americans Want Most Once Finances Improve?

Fifty-one percent of Americans in a recent poll say that if their financial situation were to improve, they’d buy a home. Coming in second on the list of wishes, they’d make repairs or improvements to the home they already have, according to the poll of more than 1,400 Americans conducted by the National Foundation for Credit Counseling Web site, www.DebtAdvice.org.

Meanwhile, 17 percent of Americans polled said they’d upgrade their car and 9 percent said they’d take a vacation.

"Home ownership has traditionally been a part of sound financial planning," says Gail Cunningham, spokesperson for the NFCC, a nonprofit credit counseling organization. "With a combined total of 74 percent of respondents selecting a home-oriented option, the poll results strongly suggests that people continue to place value in owning a home, and are anxious to buy a house or improve their existing one."

Home Ownership Matters

Home ownership has a significant impact on net worth, educational achievement, civic participation, health, and overall quality of life. And, home ownership helps create jobs—lots of them—right here at home.

Home Ownership matters…to people, to communities, and to America. Why?

For every two homes sold, one job is created in the U.S.
Each purchase generates as much as $60,000 in economic activity over time.
The home ownership debate

Some who care about creating jobs also argue that home ownership may be overrated, and that we might be better off as a nation of renters.

If that’s of concern to you, follow the debate about federal government incentives to home ownership—the outcome of which will determine whether the average American can still get an affordable mortgage and whether home owners can continue to deduct their mortgage interest as a benefit of home ownership.

Stay in the know on this debate by subscribing to the HouseLogic newsletter and following us on Facebook and Twitter. Sign up in the “Stay Connected” box at the top of this page.
Read about the issues affecting you as a home owner right now:
Home ownership

It Pays to Support Responsible Home Ownership
Protect your home’s value and build stronger communities.

Home Ownership Matters Bus Tour Hits the Road
The Home Ownership Matters bus tour, sponsored by the NATIONAL ASSOCIATION OF REALTORS®, is revving up to celebrate the benefits of home ownership with you.

Home Ownership Matters Ad

Mortgages

How Fannie Mae, Freddie Mac Save You Money
Home owners who use Fannie Mae and Freddie Mac mortgages save thousands of dollars in interest payments each year.

Show Your Support for FHA
FHA supports home values by providing a steady source of mortgage financing for families across the country, but critics worry it has taken on too much risk.

Mortgage deduction

Your Mortgage Deduction: Turn Tax Savings into Home Value
Sock away your mortgage deduction tax savings, and you’ll have a nice cushion for life’s necessities—and a few luxuries. Here’s how a typical household might spend their tax savings at various life stages.

7 Mortgage Interest Deduction Myths
Think losing the mortgage interest deduction would be no big deal? We bust seven myths to show why the cost is bigger than you think.

Mortgage Interest Deduction Vital to Housing Market
The mortgage deduction saves the average home owner thousands of dollars at tax time, supports home values at the community level, and helps American home buyers get into their first house.

Deduct Mortgage Interest and Home Equity Loans
Deducting mortgage interest, as well as interest on home equity loans and HELOCs, can save you money on taxes.

MID app
Estimate your tax savings based on the mortgage interest deduction.

Home Sales on the Rise: Ready for Spring Buying Season?

Existing-home sales rose 4.3 percent in January to a seasonally adjusted annual rate of 4.57 million, marking the third gain for home sales in the last four months, the National Association of REALTORS® reports.

“The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” NAR’s Chief Economist Lawrence Yun says.

While sales ticked up, inventories of for-sale homes also continued to show improvement, NAR reported. At the end of January, total housing inventory fell 0.4 percent to 2.31 million existing homes for sale, which represents a 6.1-month supply at the current sales pace.

“The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers,” Yun says. “Foreclosure sales are moving swiftly with ready home buyers and investors competing in nearly all markets. A government proposal to turn bank-owned properties into rentals on a large scale does not appear to be needed at this time.”

Unsold listed inventory has steadily dropped since reaching a peak of 4.04 million in July 2007. It now is 20.6 percent below where it was a year ago, NAR reports.

Housing Affordability Improves
As home prices have fallen and mortgage rates at all-time record lows, housing affordability is at some of its highest levels on record.

“Word has been spreading about the record high housing affordability conditions and our members are reporting an increase in foot traffic compared with a year ago,” says NAR President Moe Veissi. “With other favorable market factors, these are hopeful indicators leading into the spring home-buying season. We’re cautiously optimistic that an uptrend will continue this year.”

The national median existing-home price for all housing types in January was $154,700, which is down 2 percent year-over-year.

Distressed sales, which tend to sell at steep discounts, continue to hamper home prices nationwide. Foreclosures and short sales accounted for 35 percent of all January home sales, which is up slightly from 32 percent in December.

Still, “home buyers over the past three years have had some of the lowest default rates in history,” Yun said. “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”

Breakdown by Housing Type
Here’s a closer look at how home sales fared by housing type in January:

Single-family home sales: increased 3.8 percent to a seasonally adjusted annual rate of 4.05 million in January from 3.90 million in December. They are 2.3 percent above the 3.96 million-unit pace a year ago. Median price: $154,400 in January, down 2.6 percent from January 2011.

Existing condominium and co-op sales: rose 8.3 percent to a seasonally adjusted annual rate of 520,000 in January from 480,000 in December. They are 10.3 percent lower than the 580,000-unit level in January 2011. Median price: $156,600 in January, up 2 percent from a year ago.

Home Sales by Region
The following is a breakdown of existing-home sales in January by region:

•Northeast: increased3.4 percent to an annual pace of 600,000 in January and are 7.1 percent above a year ago. Median price: $225,700, which is 4.2 percent below January 2011.
•Midwest: increased 1 percent in December to a level of 980,000 and are 3.2 percent higher than January 2011. Median price: $122,000, down 3.9 percent from a year ago.
•South: rose 3.5 percent to an annual level of 1.76 million in January but are unchanged from a year ago. Median price: $134,800, which is 0.3 percent below January 2011.
•West: increased 8.8 percent to an annual pace of 1.23 million in January but are 3.1 percent below a spike in January 2011. Median price: $187,100, down 1.8 percent from a year ago.
Contract Delays, Cancellations Remain High
Twenty-one percent of NAR members in January reported delays in contracts, and 33 percent said contracts fell through, according to NAR. The number of contract cancellations remains mostly unchanged from December.

The increase in the past year of contract cancellations or delays has been blamed on more lenders declining mortgage applications from stricter underwriting standards and low appraisals coming in under the agreed upon contract price.

Source: National Association of REALTORS®

Is Earnest Money Required in A Short Sale?

Is Earnest Money Required In A Short Sale Situation?


Q: My agent informed me that earnest money for a short sale transaction was required to make a contract binding. Is that true? More importantly, is earnest money refundable if a buyer pulls out of a contract prior to bank approval even though our contract provides for bank approval within 60 days?
–Anonymous, Bartlett, IL

A: The promise of the earnest money deposit is needed, but the money does not have to be placed into escrow until the bank approves the sale. This is a common error.

The contract is not binding because it is still subject to the banks approval. But even if you do place the money into escrow, you still have the right to its return before bank approval. Even after bank approval, you may still have a right to its return, but this is dependent on the terms of the contract.

If the contract cancels and your deposit is in escrow, then you will need both you and the seller to sign documents allowing its release. Without the signatures, you start down the path of legal recourse.

I always recommend that in a short sale, the earnest money deposit be placed into escrow after the banks approval. Since banks do not give you much time to close after their approval, I tell my clients to do their investigation, inspections and prepare their financing documents with the lender’s underwriter before the bank approves the short sale. This way when the approval arrives, the buyer is ready to close quickly.

Costs Associated with a Home Loan

Costs Associated with a Home Loan
Closing costs are the actual expenses that the lender incurs in the origination of a new home loan.

I want to review some of the costs you can expect to pay associated with any new home loan. With any luck, the builder or seller will agree to pay at least some of these expenses for you. But regardless of who pays them, these costs are part of the price of buying your next home, so let's take a look. They are closing costs, loan discount points and prepaid items.
Closing costs are the actual expenses that the lender incurs in the origination of a new home loan. Some of the costs are related to your loan application, such as the expense of newly updated credit reports on all applicants. Other fees are related to the house itself, such as the appraisal of the property. Others are payment to the lender for processing your application, such as the loan origination fee. All these costs are lumped into a broad category called "closing costs." Unless the seller offers to pay them for you, this area of expenses is charged to the buyer, and often runs between 2 and 3 percent of the amount being borrowed. Because different states have different fees and taxes that are a part of these costs, it's impossible to generalize nationwide. So it's important that you talk with a reputable lender ahead of time about what costs you can expect to pay in your part of the country.
Loan discount points are, in essence, a form of prepaid interest. One discount point is exactly equal to one percent of the amount being borrowed. It is paid in cash at closing to the lender as a form of interest. Discount points have the effect of lowering the stated interest rate you will pay on the loan you obtain. For example, a lender might offer you a 30 year fixed rate loan at 8% with zero points or the same loan at 7.5% with 2 discount points. Because the points are considered interest, the yield to the lender is approximately the same. So why, you are asking, would I want to pay points? You probably won't, but sometimes new home builders or employers will offer to pay up to a certain number of points as an incentive, and I want to make sure you get everything that's coming to you.
Last, there is the issue of prepaid items. Most home lenders want you to set up what is called an "escrow" account. This is nothing more than a savings account that the lender holds. Every month you will, in addition to your regular loan payment, deposit a sum for property taxes and for homeowner's insurance into this account. And when the next bill comes due for taxes or insurance, your lender will make the payment for you. The reason that all this matters today is that, on the day of your purchase, you will be required to set up an escrow account with about 9 months worth of taxes and about 2 months worth of insurance payments. In addition, you will have to pay for the first year's insurance policy in full. These costs are called prepaid items, and you must pay for them yourself.
Because regulations and customs vary from state to state, the amount you need at settlement may be more or less than the amounts I have discussed here. Talk to a reputable lender to get an accurate estimate of how much you will need to buy your next home.

A Short Guide to Real Estate Lingo and Acronyms

A Short Guide to Real Estate Lingo and Acronyms
Real estate ads are usually full of acronyms and terms that are unfamiliar to first-time buyers.

Here's a cheat sheet to let you in on the lingo.

4B/2B -- four bedrooms and two bathrooms. "Bedroom" usually means a sleeping area with a window and a closet, but the definition varies in different places. A "full bathroom" is a room with a toilet, a sink and a bathtub. A "three-quarter bathroom" has a toilet, a sink and a shower. A "half bathroom" or powder room has only a toilet and a sink.

assum. fin. -- assumable financing
closing costs -- the entire package of miscellaneous expenses paid by the buyer and the seller when the real estate deal closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney's settlement charges, transfer taxes, recording fees, title insurance and so on. Closing costs are generally paid through escrow.

CMA -- comparative market analysis or competitive market analysis. A CMA is a report that shows prices of homes that are comparable to a subject home and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.

contingency -- a provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One example is a buyer's contractual right to obtain a professional home inspection before purchasing the home.
dk -- deck
expansion pot'l -- expansion potential mean that there's extra space on the lot or the possibility of adding a room or even an upper level, subject to local zoning restrictions.
fab pentrm -- fabulous pentroom, a room on top (but under the roof) that has great views
FDR -- formal dining room
fixture -- anything of value that is permanently attached to or a part of real property. (Real estate is legally called "real property," while movables are called "personal property.") Examples of fixtures include installed wall-to-wall carpeting, light fixtures, window coverings, landscaping and so on. Fixtures are a frequent subject of buyer and seller disputes. When in doubt, get it in writing.

frplc, fplc, FP -- fireplace
gar -- garage (garden is usually abbrevated as "gard.")
grmet kit -- gourmet kitchen
HDW, HWF, Hdwd -- hardwood floors
hi ceils -- high ceilings
in-law potential -- potential for a separate apartment, subject to local zoning restrictions
large E-2 plan -- this is one of several floorplans available in a specific building

listing -- an agreement between a real estate broker and a home owner that allows the broker to market and arrange for the sale of the owner's home. The word "listing" is also used to refer to the for-sale home itself. A home being sold by the owner without a real estate agent isn't a "listing."

lo dues -- low homeowner's association dues. But find out how "low" the dues are compared to other dues in the area.

lock box -- locked key-holding device affixed to a for-sale home so real estate professionals can gain entry into the home after obtaining permission from the listing agent

lsd pkg. -- leased parking area. May come with additional cost.
MLS -- Multiple Listing Service. An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members, who are real estate brokers. Membership isn't open to the general public, although selected MLS data may be sold to real estate listings Web sites. MLSs are local or regional. There is no MLS covering the whole country.

nr bst schls -- near the best schools
pot'l -- potential
pvt -- private
pwdr rm -- half bathroom or powder room
REALTOR® -- a real estate broker or sales associate who is a member of the National Association of REALTORS®. Not all real estate agents are REALTORS®.

title insurance -- an insurance policy that protects a lender's or owner's interest in real property from assorted types of unexpected or fraudulent claims of ownership. It's customary for the buyer to pay for the lender's title insurance policy.
upr -- upper floor
vw, vu, vws, vus -- view(s

Fed Vows to Keep Rates Low Until 2014

Daily Real Estate News | Thursday, January 26, 2012
The Federal Reserve announced that short-term interest rates will likely stay near zero for nearly three more years, a move that is expected to spillover to long-term mortgage rates for home buyers and home owners.

In August, the Fed had made a rare move to say it would keep rates near zero until at least mid-2013. The Fed said Wednesday that the economy still needs more help and it will now extend that period to 2014.

Fed Chairman Ben Bernanke said in a news conference that the Fed isn’t happy with the modest economic recovery and that the Fed may need to take additional steps to spur recovery. He did not comment further on what those steps might be, though.

While the economy has improved somewhat in recent weeks, Fed officials say it’s worried about “strains in global financial markets” and the still high unemployment rate.

Some critics say that the Fed’s vow to keep mortgage rates longer won’t do enough to help the economy and the housing market. They argue that too many Americans are already unable to take advantage of the record low mortgage rates because of the tightening of lending standards.

Bernanke shared that concern, saying that millions of home owners were unable to refinance because of damaged credit or being from underwater in their homes.

Source: “Fed Sees Low Rates to 2014,” The Wall Street Journal (Jan. 26, 2012) and “Fed Signals That a Full Recovery Is Years Away,” The New York Times (Jan. 25, 2012)

Tax Credits for Adding or Replacing Insulation

The 2010 energy tax credit for adding insulation is gone, but a smaller one in 2011 is better than nothing.

Whether it’s summer heat or winter cold, insulation makes your house a lot more livable. And if you added insulation in 2011, you may be eligible to collect a $500 energy tax credit.

Tax credit limits and deadlines:10% of expenditures, up to $500 for the year, for all energy improvements combined.
Insulation must have been installed by Dec. 31, 2011.
Save receipts and labels for Uncle Sam.
Be sure to file IRS Form 5695 with your 2011 return.
The Energy Star site is your safest bet for information on how to get the credit. Energy Star has been pretty flexible on what it allows for this credit:

Batts
Rolls
Blow-in fibers
Rigid boards
Expanding spray
Pour-in-place
Products that reduce air leaks also qualify:

Weather stripping (such as fabric, foam, or metal to provide a seal)
Spray foam in a can, designed to air seal
Caulk designed to air seal
House wrap
Installation isn’t covered.

Don’t rely solely on contractors who may not know the details or who promise their products will get the credit in order to make a sale.

As of January 2012, the feds haven’t extended the energy tax credits for insulation beyond 2011.



Read more: http://www.houselogic.com/home-advice/tax-credits/tax-credits-adding-or-replacing-insulation/#ixzz1kaE2zHcz

2011 Energy Tax Credits: What You Need to Know to Collect

They’re not as much as they used to be, but there are still energy tax credits to be had for upgrades made in 2011.

2011’s federal energy tax credits of up to $500 for various home improvements are a far cry from what they were in 2009 and 2010. But if you upgraded to one or more of the following systems in 2011, you may be eligible to take a tax credit on your 2011 returns. (As of January 2012, the feds haven’t extended the credits beyond 2011.)

Biomass stoves
Heating, ventilation, air conditioning
Insulation
Home Taxes & Financing
Taxes & Incentives

Tax Credits
They’re not as much as they used to be, but there are still energy tax credits to be had for upgrades made in 2011.Effort: Low 1-2 hrs (Form 5695)
Saves: Low $500 (tax credit).

2011’s federal energy tax credits of up to $500 for various home improvements are a far cry from what they were in 2009 and 2010. But if you upgraded to one or more of the following systems in 2011, you may be eligible to take a tax credit on your 2011 returns. (As of January 2012, the feds haven’t extended the credits beyond 2011.)

Biomass stoves
Heating, ventilation, air conditioning
Insulation
Roofs (metal and asphalt)
Water heaters (non-solar)
Windows, doors, and skylights
Storm windows and doors
The energy tax credits are small, but at least a credit is better than a deduction:

Deductions just reduce your taxable income.
With a credit, you get a dollar-for-dollar reduction in your tax liability: If you get the $500 credit, you pay $500 less in taxes.
Other limits on IRS energy tax credits besides $500 max

Credit only extends to 10% of the cost (not the 30% of yesteryear), so you have to spend $5,000 to get $500.
$500 is a lifetime limit. If you pocketed $500 or more in 2009 and 2010 combined, you’re not entitled to any more money for energy-efficient improvements in the above seven categories. But if you took $300 in the last two years, for example, you can get up to $200 in 2011.
With some systems, your cap is even lower than $500.
$500 is the max for all qualified improvements combined.
Certain systems capped below $500

No matter how much you spend on some approved items, you’ll never get the $500 credit—though you could combine some of these:

System Cap
New windows $200 max (and no, not per window—overall)
Advanced main air-circulating fan $50 max
Qualified natural gas, propane, or oil furnace or hot water boiler $150 max
Approved electric and geothermal heat pumps; central air-conditioning systems; and natural gas, propane, or oil water heaters $300 max

And not all products are created equal in the feds’ eyes. Improvements have to meet IRS energy-efficiency standards to qualify for the tax credit. In the case of boilers and furnaces, they have to meet the 95 AFUE standard. EnergyStar.gov has the details.

Tax credits cover installation—sometimes

Rule of thumb: If installation is either particularly difficult or critical to safe functioning, the credit will cover labor. Otherwise, not. (Yes, you’d have to be pretty handy to install your own windows and roof, but the feds put these squarely in the “not covered” category.)

Installation covered for:

Biomass stoves
HVAC
Non-solar water heaters
Installation not covered for:

Insulation
Roofs
Windows, doors, and skylights
How to claim the 2011 energy tax credit

Determine if the system you installed is eligible for the credits. Go to Energy Star’s website for detailed descriptions of what’s covered; then talk to your vendor.
Save system receipts and manufacturer certifications. You’ll need them if the IRS asks for proof.
File IRS Form 5695 with the rest of your tax forms in 2012.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice, and remember that tax laws may vary by jurisdiction.

December Existing-Home Sales Show Uptrend

December Existing-Home Sales Show Uptrend
Daily Real Estate News | Friday, January 20, 2012
Existing-home sales continued on an uptrend in December, rising for three consecutive months and remaining above where they were a year ago, according to the National Association of REALTORS®.

The latest monthly data shows total existing-home salesrose 5.0 percent to a seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November, and are 3.6 percent higher than the 4.45 million-unit level in December 2010. The estimates are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops.

Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

For all of 2011, existing-home sales rose 1.7 percent to 4.26 million from 4.19 million in 2010.

Affordability Conditions
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to another record low of 3.96 percent in December from 3.99 percent in November; the rate was 4.71 percent in December 2010; recordkeeping began in 1971.

NAR President Moe Veissisaid more buyers are expected to take advantage of market conditions this year. “The American dream of homeownership is alive and well. We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves,” he said. “More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services.”

Total housing inventory at the end of December dropped 9.2 percent to 2.38 million existing homes available for sale, which represents a 6.2-month supply at the current sales pace, down from a 7.2-month supply in November.

Available inventory has trended down since setting a record of 4.04 million in July 2007, and is at the lowest level since March 2005 when there were 2.30 million homes on the market.

“The inventory supply suggests many markets will see prices stabilize or grow moderately in the near future,” Yun said.

Who’s Buying What
Foreclosures sold for an average discount of 22 percent in December, up from 20 percent a year ago, while short sales closed 13 percent below market value compared with a 16 percent discount in December 2010.

The national median existing-home price for all housing types was $164,500 in December, which is 2.5 percent below December 2010. Distressed homes — foreclosures and short sales — accounted for 32 percent of sales in December (19 percent were foreclosures and 13 percent were short sales), up from 29 percent in November; they were 36 percent in December 2010.

All-cash sales accounted for 31 percent of purchases in December, up from 28 percent in November and 29 percent in December 2010. Investors account for the bulk of cash transactions.

Investors purchased 21 percent of homes in December, up from 19 percent in November and 20 percent in December 2010. First-time buyers fell to 31 percent of transactions in December from 35 percent in November; they were 33 percent in December 2010.

Contract failures were reported by 33 percent of NAR members in December, unchanged from November; they were 9 percent in December 2010. Although closed sales are holding up better than this finding would suggest, contract cancellations are caused largely by declined mortgage applications and failures in loan underwriting from appraised values coming in below the negotiated price.

Single-family home sales increased 4.6 percent to a seasonally adjusted annual rate of 4.11 million in December from 3.93 million in November, and are 4.3 percent higher than the 3.94 million-unit pace a year ago. The median existing single-family home price was $165,100 in December, which is 2.5 percent below December 2010.

Existing condominium and co-op sales rose 8.7 percent to a seasonally adjusted annual rate of 500,000 in December from 460,000 in November but are 2.0 percent below the 510,000-unit level in December 2010. The median existing condo price was $160,000 inDecember, down 3.0 percent from a year ago.

Around the Country
Regionally, existing-home sales in the Northeast jumped 10.7 percent to an annual pace of 620,000 in December and are 3.3 percent above a year ago. The median price in the Northeast was $231,300, which is 2.7 percent below December 2010.

Existing-home sales in the Midwest rose 8.3 percent in December to a level of 1.04 million and are 9.5 percent above December 2010. The median price in the Midwest was $129,100, down 7.9 percent from a year ago.

In the South, existing-home sales increased 2.9 percent to an annual level of 1.76 million in Decemberand are 3.5 percent above a year ago. The median price in the South was $146,900, down 1.1 percent from December 2010.

Existing-home sales in the West rose 2.6 percent to an annual pace of 1.19 million in December but are 0.8 percent below December 2010. The median price in the West was $205,200, up 0.3 percent from a year ago.

7 Mortgage Interest Deduction Myths

Think losing the mortgage interest deduction would be no big deal?

We bust seven myths to show why the cost is bigger than you think.

Proposals floating on Capitol Hill to curb the mortgage interest deduction gloss over all the ways home owners, and even renters, would be hurt by the change. Let’s set the record straight.

Myth #1: The mortgage deduction is just for rich people.
The mortgage interest deduction helps mostly middle- and lower-income families.
65% of families who use it earn less than $100,000 per year.
91% earn less than $200,000 per year (that’s where most economists draw the line between rich and middle-class).
Only 9% earn more than $200,000 per year.
This myth may have arisen because of a related fact: If you buy a house, you’re much more likely to accumulate wealth by the end of your life. Home owners have an average net worth of $200,000, while the average renter’s net worth is $5,000, according to the Federal Reserve’s Survey of Consumer Finances.

Myth #2: I'm not affected by the mortgage deduction because I don't own a home.

If the mortgage interest deduction goes away, home values would fall by 15%, the NATIONAL ASSOCIATION OF REALTORS® estimates. When home values fall, tax revenues follow suit, giving your local government two choices:

Raise property taxes. Not only will home owners pay more in taxes, renters won’t escape unscathed either as landlords raise rents to cover their costs.
Cut services that everyone—renters and owners—enjoys.


Myth #3: Switching to a 12% mortgage interest credit would be a wash for most.


One proposal floating around Congress is to replace the mortgage interest deduction with a 12% nonrefundable mortgage interest tax credit. (Deductions reduce your taxable income; credits reduce your tax liability.) This plan would increase taxes for many home owners.

Example: If you paid $10,000 in mortgage interest, and you’re in the 25% bracket, you’d pay $1,300 in extra taxes.

The $10,000 deduction you have now saves you $2,500 on your taxes (25% x 10,000).
The 12% credit would save you only $1,200 (12% x 10,000) on your taxes.
In this scenario, if the mortgage interest deduction is changed to a 12% credit, you’d lose $1,300 (the current $2,500 savings minus the $1,200 you’ll save under the 12% plan).

Myth #4: Not that many people take the mortgage interest deduction.

There are 75 million American home owners, and 38.5 million of them take the mortgage interest deduction. The average mortgage interest tax deduction is $12,200, and a typical benefit for home owners is $3,050 a year.

The mortgage deduction is a key benefit to first-time home owners and trade-up buyers because you pay the most mortgage interest when you first take out a mortgage. (You won’t pay equal amounts of principal and interest until year 13 or later, depending on your interest rate.)

People with large families also get a lot of bang from mortgage interest deductibility—they buy relatively big houses for their big families.

Myth #5: Getting rid of the deduction won't affect me or my housing market.

It will mean lower property values for all American home owners, including the one-third who own their homes outright and the 12 million who take the standard deduction.

Even if you don’t have a mortgage, getting rid of the MID will affect how much home you can afford to buy—and how much a buyer will pay for your home.

Myth #6: People will still buy my house without the mortgage interest deduction.

Yes, people will still value home ownership, but it will be harder for them to buy your house. The mortgage interest deduction makes it cheaper to buy a home because it saves real money at tax time.

If you bought a home last year with a $200,000, 30-year, 5% fixed-rate mortgage and you’re in a 25% tax bracket, you’d save about $2,500 from the mortgage interest deduction alone in the first year you own your home. That’s money you can use to pay down other debts, save for your children’s college education, or put away to buy a move-up house.

Myth #7: Solving the U.S. budget problems requires everyone to sacrifice.

Home owners already pay 80% to 90% of the federal income tax collected. If mortgage interest deductibility disappears, you and your fellow home owners could foot 95% of federal income tax.

If you’re at the beginning of your mortgage, losing the mortgage deduction will cost you a bundle:

$26,685—a 15% drop in value for the median home valued at $177,900.
A proportionally smaller gain in overall home equity over your lifetime, because your home now starts from a lower value.
Dona DeZube has been writing about real estate for more than two decades. She lives a suburban Baltimore 1970s rancher on a 3-acre lot shared with possums, raccoons, foxes, a herd of deer, and her blue-tick hound.