Real Estate Info

2011-12-28T11:01:00.000-08:00

New Listing at 14 Josefa Way in Santa Cruz!

14 Josefa Way, Santa Cruz, CA 95060

For Sale $480,000

For more photos and detailed information, please visit: www.14Josefa.com

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Newly built very comfy home a short walk to gym, movies, restaurants and town. Granite kitchen, high ceilings, garage.

www.14Josefa.com

Features
Bedrooms:	3
Bathrooms:	2½
Square Footage:	1,584

Frank Murphy e-Pro, ABR, CRS
Keller Williams Realty

Office:	831-457-5550
Fax:	831-401-2425
Email:	frank@FrankMurphy.net
Website:	www.LiveInSantaCruz.com
DRE License:	#01014048

2011-12-13T12:56:00.000-08:00

U.S. Farmers Reclaim Land From Developers

Five years into a brutal national housing downturn, raw land destined for residential development has fallen so far in value that thousands of acres across the country are being used again for agriculture.

During the fast-moving days of the housing boom, real-estate speculators in California, Arizona, Florida and other states paid top dollar to buy land from farmers and convert it from citrus groves and cotton fields to potential subdivisions.

View Interactive

Now, with crop prices soaring and housing in a deep slump, the economics of land investment have turned upside down. Farmers and investors are buying land that had been slated for development and using it for agriculture. And they are paying a small fraction of what housing developers paid for the same land before the recession.

The trend, if it continues, could represent a historic shift away from development in the far reaches of metropolitan areas. These properties had fueled much of the housing industry's bubble last decade.

In September, the Vanderweys, an Arizona dairy farming family, paid $8 million for a 760-acre alfalfa and cotton field that had fallen into foreclosure in Buckeye, Ariz., about 30 miles west of Phoenix. That same parcel, called Liberty Farm, had been sold to real-estate speculators in 2005 for $40.8 million. The Vanderweys want to plant hay.

California farmer Paul Singh bought this land from housing developers.

"These prices are becoming the new normal," said Nick Vanderwey, one of four brothers who purchased the farmland. "Everything in this area is coming back into farmers' hands."

Nationwide, residential land values in the U.S. have fallen nearly 70% since peaking in the second quarter of 2006, according to a recent report by the Lincoln Institute of Land Policy, a Cambridge, Mass., think tank. Meanwhile, the value of U.S. cropland (excluding Alaska and Hawaii) rose close to 20% between 2007 and 2011, according to the U.S. Department of Agriculture.

The demand for farmland is being fueled by rising prices for everything from corn to cotton. Net farm income is forecast to climb 31% in 2011 to $103.6 billion, its highest level on an inflation-adjusted basis since 1973, according to the USDA.

"Right now, people are working that land for whatever value it has, which usually means they're farming it or selling it to farmers," said Vernon Crowder, an economist with Rabobank International, a major U.S. agricultural lender based in the Netherlands.

These changing dynamics have turned farmers into land speculators and beneficiaries of the housing bust—sometimes buying back the same land they had sold earlier.

Consider the England family, which recently repurchased 430 acres of cotton fields in Eloy, Ariz. In 2004, the Englands had paid $731,000 for the parcel about 65 miles southeast of Phoenix. The family then flipped the property in 2009 to a Milwaukee-based apartment builder for $8.6 million. Two months ago, the family, which had been leasing the land to grow cotton, bought back the farm out of foreclosure for $1.75 million.

"It was a pretty good deal," said Don England Jr., as he rode his tractor around the property one day recently.

Putting residential land back under the plow reflects a major demographic shift. Since World War II, development has spread out from cities to suburbs and then to fringe areas known as exurbs. During the housing boom, builders poured hundreds of millions of dollars into land in the exurbs, where they built quick-and-easy tract homes and sold them to first-time buyers willing to commute long distances to employment centers. The strategy worked as long as gasoline was cheap and jobs plentiful.

Declining Home Values

View Interactive

Now, with gas prices above $3.40 a gallon, unemployment hovering around 9% and home values sinking, demand for new exurban houses has largely evaporated.

"There's no foreseeable market for that housing in the future," said Christopher Leinberger, a visiting fellow at the Brookings Institution who has written about land-pricing trends.

Between 2000 and 2007, the amount of land used for farms fell by two million to four million acres a year, according to USDA surveys. But since 2007, the conversion rate has slowed and the amount of land being farmed has held steady at 920 million acres.

Values of land once slated for housing also have fallen sharply in the Midwest, which didn't see the same big run-up in prices as California, Nevada and Arizona.

In late May, a group of corn and soybean farmers bought 650 acres near Manteno, Ill., about 50 miles south of Chicago, that had fallen into foreclosure after the developer who owned it filed for bankruptcy. The land originally was purchased for $15,000 to $20,000 an acre for housing for Chicago-area commuters, according to brokers involved in the deal. It was sold by a bank this year to the farmers for $8,000 an acre.

"The primary thing that was driving development here was people's desire and willingness to get out of the city," said Dean Retherford, the broker who negotiated the sale. "But development is over. It's done…It'll be 15-20 years before this land is developed."

Last year in California, Paul Singh, who grows nut trees and grapes used for raisins, paid $27,600 an acre, or a total of $9 million, for 326 acres in Hanford in the San Joaquin Valley, one of the nation's largest farming regions.

A few years earlier, the land had been purchased for $82,800 an acre by Ennis Homes Inc. of Porterville, Calif. It envisioned a development called Villagio, with nearly 1,500 homes along with a shopping center. Ennis filed for bankruptcy in 2010 due to falling land values.

Mr. Singh plans to plant a wine-grape vineyard on the property and grow walnuts. He expects to net $800,000 to $1 million a year, roughly a 10% return on his land investment.

"Right now, it's as good as it gets. All the crops are doing really well," Mr. Singh said. "Why would any farmer sell right now? Everyone's making so much money."

Whelan, Robbie. "U.S. Farmers Reclaim Land From Developers - WSJ.com." Business News & Financial News - The Wall Street Journal - Wsj.com.

2011-12-08T11:36:00.001-08:00

FOR IMMEDIATE RELEASE

Contact: Frank Murphy-Keller Williams Realty

Frank@FrankMurphy.net

831-457-5550

Frank Murphy attends invitation-only

luxury real estate conclave

“Leaders in Luxury 2011” draws top luxury real estate professionals

Santa Cruz, CA. December 2011 – From across North America, top real estate professionals working in the upscale residential market converged in mid-November at The Ritz Carlton Laguna Niguel Hotel in Orange County (CA) at The Institute for Luxury Home Marketing’s annual Leaders in Luxury (LIL) conference where they discussed strategies for better serving buyers and sellers in today’s luxury home market.

According to Frank Murphy, an agent with Keller Williams Realty, the exclusive event was an invitation-only educational and networking opportunity for real estate professionals who handle million and multi-million dollar homes and estates. “This prestigious conference provides cutting-edge information on what’s happening in the luxury market segment, offers insights on best practices in the business, and creates valuable networking opportunities,” said Murphy.

“Leaders in Luxury registration is limited to professionals in the luxury home niche,” said Laurie Moore-Moore, Founder of The Institute for Luxury Home Marketing, the event host. “This gives LIL attendees the opportunity to build an exclusive network of contacts focused on the upscale residential industry while sharing with the best in the business. Since competency is the key to working successfully with the luxury buyer and seller,” added Moore-Moore, “LIL is designed to provide attendees with important knowledge and insights, giving them a competitive edge in meeting the needs of the affluent.”

Murphy considers attendance at Leaders in Luxury to be essential for success in today’s marketplace. “Attending the Leaders in Luxury event is an investment for my clients,” said Murphy. “With the current real estate market, I have to be proactive to stay on top of the market conditions. By networking with the best in the business, sharing ideas, and learning about the latest trends and outlooks, I can help my affluent clients find success where others are finding challenges.”

Keynote speakers included David Michonski, author of the new book, “Power Marketing for Luxury Real Estate” and Catherine Marcus of Sotheby’s International Real Estate, who was involved in the record-setting $100 million residential sale earlier this year in California’s Silicon Valley.

The Leaders in Luxury conference is an annual event. For information, visit www.LeadersinLuxury.com or contact The Institute for Luxury Home Marketing at 214-485-3000.

About The Institute for Luxury Home Marketing (ILHM)

The Institute trains real estate professionals who work in the luxury home market internationally and awards the Certified Luxury Home Marketing Specialist (CLHMS) designation which is the official designation for many North American real estate brands. Find information on live and online training at www.LuxuryHomeMarketing.com or phone 214-485-3000.

2011-10-26T10:57:00.000-07:00

4231 Sea Pines, Capitola, CA 95010

Sale Pending $312,000

For more photos and detailed information, please visit: www.4231seapines.com

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Walk to beach, movies, restaurants and shops from this single level ground floor unit. Two patios, indoor laundry, fireplace, new floors, doors, paint. Upgraded kitchen and bath.

www.4231seapines.com

Features
Bedrooms:	2
Bathrooms:	1
Style:	Condo
Square Footage:	929

Frank Murphy e-Pro, ABR, CRS
Keller Williams Realty

Office:	831-457-5550
Fax:	831-401-2425
Email:	frank@FrankMurphy.net
Website:	www.LiveInSantaCruz.com

2011-10-10T16:50:00.001-07:00

October 2011

Happy Fall! The Hunter’s Moon is coming!

The Hunter’s Moon—also known as blood moon or sanguine moon—is the first full moon after the Harvest Moon, which is the full moon nearest the autumnal equinox. The Hunter’s Moon will reach the crest of its full phase tomorrow, Tuesday, October 11, at precisely 10:06 p.m. EDT, 9:06 p.m. CDT, 8:06 p.m. MDT, and 7:06 p.m. PDT.

Here is a link to our October e-Newsletter

Don't miss this month's cover story: "MARKET VALUE - Why The Market (Not Sellers) Determines The Sale Price Of Your Home"

Visit our October E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

Tap Our Expertise
Even if you're not ready to buy or sell a home right now, we would be happy to keep you up-to-date on developments in the real estate industry, mortgage financing and our local market. Simply reply to this e-mail or give us a call!

We hope you enjoy this monthly electronic newsletter. Please forward the link above to a friend who would also appreciate the information. If you have any comments, please e-mail them to us. Or, if you would like answers to your specific real estate questions, we'd be happy to help!

Frank Murphy
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062
DRE License #01014048
Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2011-10-07T11:24:00.000-07:00

North Coast Comfort

Old 2,300+ foot barn may have served Coast Dairies. Two homes expanded from original farm structures. "Milk Room" has upstairs bedroom, bath & loft with lovely views of flat garden area. "Big House" has kitchen/great room, funky deck, nice yard, 2 bedrooms, newer bath. Extra "Creek Cabin" for solitude, art studio. On Laguna Creek at Hwy. 1. Must contact listing agent for info and showings.

www.5998Laguna.com

2011-09-27T14:54:00.001-07:00

Build Your Dream Home

Views, privacy and quiet are the key attributes describing this property. Much of the pre-development work is completed. New well, septic perc test, & preliminary soils investigations done. Preliminary plans for a barn, second unit and main house all in various stages of completion. Take off from here or design your own view home.

www.1050wilderfield.com

2011-09-21T11:05:00.000-07:00

Fall 2011

The Murphy Team is growing! On September 1st, Frank and Sue welcomed into the world their first grandchild!

Kieran John Murphy weighed in at 7 lbs. 6 oz and 20 1/2 inches long.

Everyone is doing great and Frank and Sue couldn’t be happier!

Here is a link to our September e-Newsletter

Don't miss this month's cover story: "ALL CASH? - An Inside Look At Buying Property Today Without A Mortgage"

Visit our September E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

"Credit Score Know-How"

"Be Prepared When Selling Your Home"

"Elements Of Eco-Friendly Living"

"Beware Of Strategic Default"

"Measures Of Success"

Tap Our Expertise
Even if you're not ready to buy or sell a home right now, we would be happy to keep you up-to-date on developments in the real estate industry, mortgage financing and our local market. Simply reply to this e-mail or give us a call!

Oh by the way, did you know you can now get an automated investment analysis of your neighborhood - complete with Active, Pending and Sold homes all mapped out - sent directly to your email inbox every month? Now you can always know the value of your home. Try it today. It's informative, it's accurate, and it's free. Oh, and please tell a friend or neighbor too!

Check it out and see what you think at Free Market Snapshot

P.S.: Remember to visit my blogs for Local and National real estate and related information and updates!

Frank Murphy
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062
DRE License #01014048
Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2011-09-14T14:12:00.000-07:00

Only single level home in Moore Creek Estates. Truly a turnkey gem. New kitchen, baths, floors, paint, grounds, all since 2008. Leaving area. Our loss is your gain! Idyllic setting and 10,000+ foot parcel with dozens of mature fruit trees, gentle terracing, great sun and good privacy. Mature plantings incl. 6 citrus, 2 kiwi groups, 8 apples, 2 pears, loquat, berries and raised bed veggies.

Check out photos and more information at: www.302MooreCreek.com

2011-08-23T14:51:00.000-07:00

Vehicle Registration Update

Vehicle owners with registration renewal dates between July 1, 2011 and December 31, 2011 are being provided a 30-day grace period from the expiration date before late payment penalties are imposed NOTE: The billing notice has not been adjusted to reflect the grace period. Instead, a special insert included with the billing notice indicates that penalties will not be imposed until the 31st day after the expiration date. At that point in time, the penalties are calculated at the regular penalty rate of 60%.

Fee changes include:

· Vehicle License Fee rate decreased from 1.15% to 0.65%, and,

· A $12 increase in the registration fee (from $34 to $46).

Customers are encouraged to utilize the renewal by mail or online Internet renewal program to renew their registration. These alternative service delivery options will automatically waive late fees for first 30 days after expiration date. New registration cards and stickers will be issued as quickly as possible. NOTE: If customers were unaware of the 30-day grace period and included penalty fees in their mailed payment that are not due, DMV will automatically refund the overpayment. Please allow 3-4 weeks for the refund to be processed.

Law enforcement is aware and will not cite vehicles until the first day of the second month after the vehicle registration expires. For example: A vehicle with a registration expiration date of July 10th would not be cited for delinquent registration prior to September 1, 2011

http://www.dmv.ca.gov/pubs/newsrel/newsrel11/julyrenewals.htm

2011-08-23T14:42:00.000-07:00

Federal Tax Rules Regarding the Sale of Your Home

Curious about the federal tax rules regarding the sale of your home, how the gain on that sale is taxed, and how to determine if the gain from your sale qualifies to be excluded from your taxable income?

Last year’s IRS bulletin “Selling Your Home” for use in preparing your 2010 tax return includes a worksheet for calculating your home’s cost basis, used in determining the size of your gain on the sale of your home. It also describes the criteria used to qualify your home sale for exclusion from your taxable income.

Please follow this link to the IRS publication 523 “Selling Your Home” posted on the IRS site

http://www.irs.gov/pub/irs-pdf/p523.pdf

2011-08-01T09:18:00.000-07:00

How to Make your Home Look More Expensive

It’s pretty rare to come across a homeowner who doesn’t want his or her home to come across as expensive or even possibly luxurious to some extent. Your home is most likely your largest investment, your pride and joy, and so why wouldn’t you want it to look its finest. It can be seen as a reflection of who you are, and especially when used to entertain guests it can be utilized to potentially “show off” just how hard you’ve been working. The tricky part in this whole expensive appearance scheme is the financial aspect. The cost of your home itself may have burned through your home budget alone, and so the money left over for its interior decorations may be limited. For those of us who aren’t fortunate enough to spend infinite amounts of money on interior designers and on the most lavish foreign furniture and paintings, we have to make some clever choices. Just like with clothing, an impeccably dressed person does not necessarily have to buy their garments from the top fashion designers to look good. And the same can be said for homes! The price tags of a couch or dining room table are not the only indicators of class and luxury. How you arrange your home, and how you choose specific things to compliment its layout can make a world of difference with just how pricey your abode appears. And even if your bank account does allow you to afford the more luxurious décor items, you too can make use of these tips to making your home appear more expensive:

MAINTENANCE. It seems so logical, but often homes can go without a good cleaning for a lengthy period of time. Keeping your home clean and tidy is most definitely the simplest way to looking more expensive. Clutter and mess absolutely degrades its worth. WALLS. The quality of your walls says a lot about the quality of your entire home. A fresh coat of paint is always refreshing to see, and be sure to cover chipped areas and to remove marks.

FRAMES. Posters and pictures taped up on walls just looks sloppy. Buying frames for your posters and pictures that are worth displaying looks absolutely polished and presentable. Nice looking frames need not be expensive either. This also goes for people who have not displayed anything on their walls. Hanging framed posters and pictures and pieces of art always looks very appealing.

TEXTURE & PATTERNS. From your pillows to your rug, opt for regal looking patterns, most likely in deep tones. Window drapes in one room, like your family or living room, just screams luxury, and if it’s not too daring for you, a faux fur rug can do wonders. Neither has to be pricey, but just be careful not to go crazy on the patterns. Stick to a few specific things to decide to pattern up.

LITTLE THINGS. Focusing on small, cheaper house items can really spruce up your home. Opt for more expensive looking garbage bins, coasters and the like. For instance, choose a more visually pleasing material like glass or wood over plastic.

WHITE. When in doubt, choose white. If you’re having a hard time choosing the color scheme for a room or aren’t savvy with prints/patterns, white is the way to go. It completely opens up and refreshes any room.

ONE PIECE. If your budget allows, splurge on one expensive item in your most popular room. If possible, splurge on at least one item for each of your rooms used for entertaining.

2011-07-01T10:35:00.001-07:00

Remember, this is what the 4th is about...

(Adopted by Congress on July 4, 1776)

The Unanimous Declaration
of the Thirteen United States of America
When, in the course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the laws of nature and of nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness. Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security. –Such has been the patient sufferance of these colonies; and such is now the necessity which constrains them to alter their former systems of government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute tyranny over these states. To prove this, let facts be submitted to a candid world.

He has refused his assent to laws, the most wholesome and necessary for the public good.

He has forbidden his governors to pass laws of immediate and pressing importance, unless suspended in their operation till his assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other laws for the accommodation of large districts of people, unless those people would relinquish the right of representation in the legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved representative houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the legislative powers, incapable of annihilation, have returned to the people at large for their exercise; the state remaining in the meantime exposed to all the dangers of invasion from without, and convulsions within.

He has endeavored to prevent the population of these states; for that purpose obstructing the laws for naturalization of foreigners; refusing to pass others to encourage their migration hither, and raising the conditions of new appropriations of lands.

He has obstructed the administration of justice, by refusing his assent to laws for establishing judiciary powers.

He has made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance.

He has kept among us, in times of peace, standing armies without the consent of our legislature.

He has affected to render the military independent of and superior to civil power.

He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his assent to their acts of pretended legislation:

For quartering large bodies of armed troops among us:

For protecting them, by mock trial, from punishment for any murders which they should commit on the inhabitants of these states:

For cutting off our trade with all parts of the world:

For imposing taxes on us without our consent:

For depriving us in many cases, of the benefits of trial by jury:

For transporting us beyond seas to be tried for pretended offenses:

For abolishing the free system of English laws in a neighboring province, establishing therein an arbitrary government, and enlarging its boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule in these colonies:

For taking away our charters, abolishing our most valuable laws, and altering fundamentally the forms of our governments:

For suspending our own legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated government here, by declaring us out of his protection and waging war against us.

He has plundered our seas, ravaged our coasts, burned our towns, and destroyed the lives of our people.

He is at this time transporting large armies of foreign mercenaries to complete the works of death, desolation and tyranny, already begun with circumstances of cruelty and perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the head of a civilized nation.

He has constrained our fellow citizens taken captive on the high seas to bear arms against their country, to become the executioners of their friends and brethren, or to fall themselves by their hands.

He has excited domestic insurrections amongst us, and has endeavored to bring on the inhabitants of our frontiers, the merciless Indian savages, whose known rule of warfare, is undistinguished destruction of all ages, sexes and conditions.

In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury. A prince, whose character is thus marked by every act which may define a tyrant, is unfit to be the ruler of a free people.

Nor have we been wanting in attention to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our separation, and hold them, as we hold the rest of mankind, enemies in war, in peace friends.

We, therefore, the representatives of the United States of America, in General Congress, assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the name, and by the authority of the good people of these colonies, solemnly publish and declare, that these united colonies are, and of right ought to be free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain, is and ought to be totally dissolved; and that as free and independent states, they have full power to levy war, conclude peace, contract alliances, establish commerce, and to do all other acts and things which independent states may of right do. And for the support of this declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

2011-05-05T16:30:00.000-07:00

Attention Property Owners in the Santa Cruz City Schools

Elementary and High School Districts

Notice of Availability of Senior Citizen Exemption

From 2011-12 Parcel Taxes

Seniors can apply for exemption from the parcel taxes currently in effect by filing an application with the District between May 1 and July 1 each year. Seniors can request that an application be mailed to them by calling the District's Business Office at 831-429-3410, ext. 223. Seniors can also download the application and instructions from this website during May and June each year. The parcel tax exemption program is for property owners who are 65 years of age or older on July 1st preceding the tax year. The exemption is for the principal place of residence only and applies to one parcel only. Exemptions which are approved are effective for the life of the parcel tax, unless ownership of the property changes. Applications are due on or before July 1st.

2011-05-02T15:01:00.001-07:00

Mother’s Day is Sunday May 8^th

Upcoming Local Events

Presented by the Bonny Doon Community School Foundation

The Hidden Gardens of Bonny Doon Saturday, May 21 and Sunday, May 22 10:00 a.m. until 4:00 p.m… Buy Tickets…

Annual Bonny Doon Art & Wine Festival Saturday, June 4-- 11:00 a.m. until 6:00 p.m. Bonny Doon Airport Gardens, Empire Grade Road…Buy Tickets…

Here is a link to our May e-Newsletter

Don't miss this month's cover story: "PRE-LOVED - Why Resale Homes Stand out In Today's Market"

Visit our May E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

Oh by the way, did you know you can now get an automated investment analysis of your neighborhood - complete with Active, Pending and Sold homes all mapped out - sent directly to your email inbox every month? Now you can always know the value of your home. Try it today. It's informative, it's accurate, and it's free. Oh, and please tell a friend or neighbor too!

Check it out and see what you think at Free Market Snapshot

Frank Murphy
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062

DRE License #01014048
Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2011-05-02T14:43:00.000-07:00

Tax Reminder:

Taxpayers have an extra weekend to file this year because of a District of Columbia holiday. The deadline for 2011 is Monday April 18, instead of Friday April 15.

Remember to file your taxes or file an extension.

Click here for more information.

Upcoming Local Events

Presented by the Bonny Doon Community School Foundation

The Hidden Gardens of Bonny Doon Saturday, May 21 and Sunday, May 22 10:00 a.m. until 4:00 p.m… Buy Tickets…

Annual Bonny Doon Art & Wine Festival Saturday, June 4-- 11:00 a.m. until 6:00 p.m. Bonny Doon Airport Gardens, Empire Grade Road…Buy Tickets…

Here is a link to our April e-Newsletter

Don't miss this month's cover story: "PRICE: How To Sell Your Home And Get Top Dollar In Today's Market"

Visit our April E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

Check it out and see what you think at Free Market Snapshot

P.S.: Remember to visit my blogs for Local and National real estate and related information and updates!

Frank Murphy
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062
DRE License #01014048
Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2011-05-02T14:29:00.000-07:00

Here is a link to our March e-Newsletter

Don't miss this month's cover story: "SMART SELLING: Take Advantage Of This Year’s Spring Selling Season"

Visit our March E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

"There’s A New Score In Town"

Check it out and see what you think at Free Market Snapshot

We hope you enjoy this monthly electronic newsletter. Please forward the link above to a friend who would also appreciate the information. If you have any comments, please e-mail them to us. Or, if you would like answers to your specific real estate questions, we'd be happy to help!

Frank Murphy
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062
DRE License #01014048
Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2011-05-02T12:50:00.000-07:00

Time Saving Tips when Caring for your Lawn and Garden

As the peak of spring approaches, and the sun begins to make its appearance more frequently, this time of year may be the perfect time to start gardening and crafting your property into something picturesque and worth showing off. Your garden and lawn are a large part of your property, and may be just as important as your home itself. So when you finally set outside to conquer those green patches of life around your home, here are some simple tips for beginners - and reminders for those who are experienced - to saving time while also making the most out of your garden this year:

§ WEEDS. When weeding, the easiest way to prevent future growths is to make sure you remove the entire weed. Weeding can be as simple as using your very own hands. If you’ve had previous weed issues, a good measure to take would be applying a herbicide to your lawn in the early spring.

§ DON’T NEGLECT. After all these colder, rainy months, it is easy to forget that our lawns need to be fed and taken care of, just as flowers do. Remember to water your lawn regularly, and also to fertilize it. However, do not go overboard with the fertilizing, as too much can lead to insects and plant disease.

§ GROUP YOUR PLANTS. Grouping your plants by their needs will save you a lot of time in the garden, and will also keep your garden more healthy. Put the plants that need more water together, and those that need less in a separate group. That way, during the numerous times you’ll be out there watering, you won’t have to move around so frequently.

§ MULCH. Don’t forget to add mulch to your garden, as this handy soil cover cuts down on your watering, weeding and fertilization time by keeping the plants cool and retaining moisture. It also adds to the attractiveness of your garden.

§ TOOLS. A big time saver can be using the right tools for the task at hand. Consult your local gardening store for what tools will suit what you wish to do in your garden, and always remember to wash and clean your tools after working to avoid rust, save money, and to get the most use out of them.

2011-03-09T14:24:00.001-08:00

The Frank Murphy Team Advantage

The Frank Murphy Team is an extraordinary group of successful and highly qualified real estate professionals ready to answer your questions and to help you with your real estate needs. The advantages of working with a Real Estate Team rather than with a solo agent are significant. Would you be comfortable having surgery performed by a doctor who books his own appointments, does his own billing, and greets you at the reception desk? Of course not! Our team members are specialists dedicated to providing quality service, like the staff of any professional group.

Frank Murphy- Broker Associate-Lead Agent

Contact Info- 831-457-5550 Frank@FrankMurphy.net
Frank has an extensive background in construction and commercial development serving as a construction superintendent for over 15 years. He has been active in the real estate industry for over 16 years. Frank is a member of the Institute for Luxury Home Marketing, a Certified Residential Specialist, an Accredited Buyer’s Agent, an e-Pro designate and Santa Cruz County’s only Allen Hainge CyberStar internet marketing specialist. Additionally, he was the 4^th highest producing Realtor in Santa Cruz County in 2009, ranked by closed sales volume.

Kathy Solomito- Realtor-Buyer Specialist

Contact Info- 831-457-5553 Kathy@FrankMurphy.net
Kathy has extensive knowledge of the Real Estate industry. She has spent time in all areas of the business including the mortgage world. Kathy’s expertise spans both the corporate and small business worlds. Kathy had a long career in high tech, working in information technology for Hewlett-Packard as well as working in consulting and project management for two general contractors. Kathy is looking forward to helping our clients find and secure their perfect property.

Glenda Whitlow- Realtor-Transaction Coordinator

Contact Info- 831-457-5570 gwhitlow@msn.com
Glenda worked for 18+ years at various title and escrow companies as an escrow officer, 5+ years as a loan processor, and has spent the last 8 years as a transaction coordinator. Glenda knows what it takes successfully close a transaction. As a part of the Frank Murphy Team, she coordinates and manages all paperwork and important dates from contract to close.

Jessica Clements- Marketing & Operations Manager

Contact Info-831-457-5551 Jessica@FrankMurphy.net
Jessica has over 10 years of experience in systems management and customer service. She has spent the last 3 years honing her systems management, marketing, and customer service skills for the Frank Murphy Team. During a transaction, she is often the first point of contact for our clients as well as our vendors. Jessica goes the extra mile to support our clients through one of the most important decisions of their life.

Joan Pelletier- Client Care Manager

Contact Info-831-457-5552 Admin@FrankMurphy.net
Joan has spent the last several years working in the real estate and marketing industries as an executive assistant. Prior to that she was the manager of a local construction company. Joan is a licensed Broker and a trained paralegal. Joan is an integral part of the Frank Murphy Team. She offers reliable and friendly support wherever needed.

The value of working with the Frank Murphy Team is that someone is always available to assist you whenever you need!

2011-02-15T13:29:00.000-08:00

February 2011

TIP: How do you profit in a buyer's market? You buy something!

Here is a link to our February e-Newsletter

Don't miss this month's cover story: "SPECIAL REPORT: Top Tips For Your 2011 Home Sale…Or Purchase!"

Visit our February E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

"4 Savvy, Smart, Sensible Tips To Get Your Home SOLD!"

"5 Top Tips, Techniques, Keys To Find A Home To Purchase"

"Downsizing Not Just For Retirees"

"Show Off Your Home During Winter"

"Reviewing Your 2011 Housing Choices"

"Last Options For Cash"

"Stop The Squeak"

Check it out and see what you think at Free Market Snapshot

P.S.: Remember to visit my blogs for Local and National real estate and related information and updates!

Frank Murphy

Broker Associate

DRE License #01014048
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062
Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2010-12-29T12:26:00.000-08:00

Here is a link to our January e-Newsletter

Don't miss this month's cover story: "TASTY TAX TREATS: Today's Homeowners Enjoy Delicious Tax Breaks"

Visit our January E-Newsletter online now by clicking the URL above. Then turn to Pages 2, 3, and 4 for more timely articles of interest to today's sellers, buyers and homeowners.

Check it out and see what you think at Free Market Snapshot

Frank Murphy
831-457-5550
1414 Soquel Avenue
Santa Cruz, California 95062

DRE License #01014048

Frank@FrankMurphy.net
www.LiveInSantaCruz.com

2010-10-12T09:47:00.000-07:00

Kathy Solomito-Buyer Specialist
The Frank Murphy Team

Please join us in welcoming the newest member of the Frank Murphy Team, Kathy Solomito.

Kathy joins the Frank Murphy team as a seasoned Realtor and Buyer Specialist.

Kathy has extensive knowledge of the Real Estate industry. She has spent time in all areas of the business including the mortgage world. In addition, Kathy has vast knowledge of both the corporate and small business industries. Kathy had a long career in the corporate world working in Information Technology for Hewlett-Packard. In the small business environment, she worked in consulting and project management for two general contractors.

Kathy has been a long time active resident of the Bonny Doon Community. In her free time, Kathy enjoys trail riding on horseback in the Santa Cruz Mountains and beyond. She also participates in dog agility trial groups and volunteers at a local long term care facility where she makes regular animal therapy visits with her dog.

Kathy’s thorough and varied knowledge makes her the perfect addition to our team.

Kathy is looking forward to helping our clients find and secure their perfect property. We are excited to have Kathy join our Team.

Feel free to contact Kathy directly regarding your Real Estate needs. She can be reached by phone at 831-457-5553 or by email at kathsolomito@gmail.com

2010-06-10T13:16:00.000-07:00

Mortgage Rates Decline

Home Buyers Get Surprise Boost From Europe Crisis as Loans Drop to Below 5%

By NICK TIMIRAOS

The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year and back near 50-year lows.

The housing industry had been bracing for months for a period of rising mortgage rates, triggered by the end of the Federal Reserve's $1.25 trillion mortgage-securities purchase program. Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market.

Instead, many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying homes or refinancing their mortgages.

Refinance business "exploded" last week, says Jeff Lazerson, chief executive of Mortgage Grader, a brokerage in Laguna Niguel, Calif. "It's schizophrenic. We all had this expectation of higher interest rates and no more refinances." He says he helped a borrower lock in a 30-year loan with a 4.25% fixed rate last week, the lowest in his 24 years in the business.

Rates on 30-year mortgages averaged 4.84% last week, according to a survey by mortgage-insurance titan Freddie Mac. Rates were quoted late Friday at 4.86%, the lowest since December 2009, according to a survey by financial publisher HSH Associates, and down from a high of 5.27% for the week ended April 9. Rates on 15-year mortgages averaged 4.24% last week—the lowest since Freddie began its survey in 1991.

Economists largely attribute the decline in mortgage rates to the European debt crisis and new concerns about the global economy, which unleashed a massive wave of cash into U.S. bonds from investors around the world.

This buying pushed down yields on Treasury bonds. Because mortgage rates are closely pegged to yields on 10-year Treasury notes, which fell to 3.2% Friday, the decline in Treasurys pulled down mortgage yields. Typically, mortgage yields remain around 1.5 percentage points above yields on 10-year Treasury notes.

Falling mortgage rates can give a powerful lift to the housing market. A general rule of thumb holds that every one percentage point decline in mortgage rates effectively lowers home prices for buyers by roughly 10%. So, if the current rates hold, say economists, that could help stabilize prices and allow current homeowners to sell existing homes without substantial price cuts.

It isn't clear how much home-buying the lower rates will spur. Demand had fallen in recent weeks after buyers raced to close sales ahead of last month's expiration of an $8,000 federal tax credit for home purchases. Applications for new-purchase loans hit a 13-year low in the week ending May 14, according to the Mortgage Bankers Association.

Borrowers do face roadblocks. Underwriting standards are their strictest in a decade, and record numbers of borrowers are "underwater," owing more to the bank than their homes are worth. That has excluded large swaths of borrowers from getting loans at the new lower rates.

Still, lower rates could widen the pool of people who qualify for a mortgage, while others may find they qualify for a slightly larger loan. "They can buy the place with the extra bedroom or the swimming pool," says Jay Brinkmann, chief economist at the Mortgage Bankers Association.

Falling rates have encouraged some Americans to consider refinancing their existing mortgages to save money. A one-percentage-point decline in mortgage rates can cut $250 off the monthly payment on a $400,000 30-year fixed-rate mortgage, giving consumers cash they can use to spend.

Richard Hunsinger plans to refinance two loans on his Potomac, Md., home into a new 15-year mortgage this week with a 4.37% rate. The 55-year-old dentist is worried that interest rates will eventually rise sharply, boosting the payment on his home-equity line of credit. His first mortgage, also a 15-year loan, currently has a fixed rate of 5.25%. And while the rate on his $240,000 home-equity loan is just 3.25%, it has risen as high as 8% in the past.

Rates "can't stay low forever," says Dr. Hunsinger. If they go up over the next year, "this will look like a really bright decision."

By historical standards, rates are incredibly low. Until 2003, rates on 30-year fixed-rate loans hadn't dipped below 5% since the 1960s.

Rates fell to similar points throughout much of the past year as the government was helping to hold down costs for borrowers.

Nearly half of all borrowers with 30-year conforming fixed-rate mortgages have mortgage rates of 5.75% or higher and could reduce their rates by a full percentage point if they refinanced at current rates, according to investment bank Credit Suisse.

Many of those borrowers may have tried to refinance last year, only to find that they couldn't qualify. When rates fell to similar lows in 2003, refinance activity hit a record $2.9 trillion, compared to $1.2 trillion last year, according to Inside Mortgage Finance, a trade publication.

Now, more private investors are coming into the market for loans, offering better prices for securities containing mortgages with low rates than they were one year ago. That could lead banks and brokers to cut upfront origination fees, and borrowers who are able to refinance could find it cheaper to do so than last year.

"I'm calling people back and saying, 'Now it's worth it,'" says Michael Menatian, a mortgage banker in West Hartford, Conn.

—Prabha Natarajan contributed to this article

2010-05-06T16:52:00.000-07:00

Consumer debt is not your friend

Seth Godin
05/05/2010

Here's a simple MBA lesson: borrow money to buy things that go up in value. Borrow money if it improves your productivity and makes you more money. Leverage multiplies the power of your business because with leverage, every dollar you make in profit is multiplied.

That's very different from the consumer version of this lesson: borrow money to buy things that go down in value. This is wrongheaded, short-term and irrational.

A few decades ago, mass marketers had a problem: American consumers had bought all they could buy. It was hard to grow because dispensable income was spoken for. The only way to grow was to steal market share, and that's difficult. Enter consumer debt.

Why fight for a bigger piece of pie when you can make the whole pie bigger, the marketers think. Charge it, they say. Put it on your card. Pay now, why not, it's like it's free, because you don't have to repay it until later. Why buy a Honda for cash when you can buy a Lexus with credit?

One argument is income shifting: you're going to make a lot of money later, so borrow now so you can have a nicer car, etc. Then, when money is worth less to you, you can pay it back. This idea is actually reasonably new--fifty years or so--and it's not borne out by what actually happens. Debt creates stress, stress creates behaviors that don't lead to happiness...

The other argument is that it's been around so long, it's like a trusted friend. Debt seems like fun for a long time, until it's not. And everyone does it. We've been sold very hard on acquisition = happiness, and consumer debt is the engine that permits this. Until it doesn't.

The thing is, debt has become a marketed product in and of itself. It's not a free service or a convenience, it's a massive industry. And that industry works with all the other players in the system to grow, because (at least for now) when they grow, other marketers benefit as well. As soon as you get into serious consumer debt, you work for them, not for you.

It's simple: when the utility of what you want (however you measure it) is less than the cost of the debt, don't buy it.

Go read Dave Ramsey's post: The truth about debt.

Dave has spent his career teaching people a lesson that many marketers are afraid of: debt is expensive, it compounds, it punishes you. Stuff now is rarely better than stuff later, because stuff now costs you forever if you go into debt to purchase it. He's persistent and persuasive.

It takes discipline to fore go pleasure now to avoid a lifetime of pain and fees. Many people, especially when confronted with a blizzard of debt marketing, can't resist.

Resist. Smart people work at keeping their monthly consumer debt burden to zero. Borrow only for things that go up in value. Easy to say, hard to do. Worth it

2010-01-11T10:28:00.001-08:00

Neat resource of vintage ads

Type in a few search terms (like Babies and Airplanes) and out pops one of the millions of ads in this incredible database.

Certain to inspire, or possibly just give you fodder for a great presentation.

2010-01-11T10:28:00.000-08:00

Neat resource of vintage ads

Type in a few search terms (like Babies and Airplanes) and out pops one of the millions of ads in this incredible database.

Certain to inspire, or possibly just give you fodder for a great presentation.

2010-01-07T09:26:00.000-08:00

Cheap Mobile Calls, Even Overseas

By Joanna Stern

http://www.nytimes.com/2010/01/07/technology/personaltech/07basics.html?pagewanted=1&th&emc=th

Recently, my parents returned from Italy with a few bottles of Chianti and $750 in AT&T calling charges. Buon giorno!

Racking up exorbitant mobile charges is easy to do if you are not careful about using your cellphone internationally. AT&T charges 99 cents a minute to use your phone in Italy (rates vary by country), and that is if you pay for the carrier’s international calling plan. If you do not, the charge goes up to $1.29 a minute.

What my parents did not realize was that they could have nearly eliminated those charges if they had set up their (in this case) iPhone and BlackBerry to take advantage of mobile Internet calling services: That $1.29-a-minute charge would have gone down to a much more reasonable 2.4 cents a minute (or nothing at all if they were on a Wi-Fi network).

The Internet has been used to make calls for some time. One of the largest providers of the service, Skype, was founded in 2003 and has more than half a billion user accounts. And while many people gather around the PC to talk to far-flung friends and family, new apps and services can replicate that experience (and that savings) on cellphones.

To transform your mobile phone into a device capable of making cheap international calls, you need to consider a few things. Ideally, you have a smartphone that can access Wi-Fi, like an iPhone or a Droid. Wi-Fi ensures the best call quality, since it’s carried over a high-speed Internet connection rather than through third-generation, or 3G, cellular networks.

But if you don’t have a Wi-Fi-enabled smartphone, you are not out of luck. There are calling services that use local phone numbers rather than wireless data connections to place calls, making them compatible with a wide range of devices. Applications can dial a local access number as if you were placing a regular call; and your call is routed over the Internet at similarly discounted rates.

There are also free calling mobile applications, each with its own layout, feature list and call quality. In my tests of more than six different applications by calling friends in Europe and Africa, these stood out:

SKYPE FOR MOBILE Like the program for Mac and PCs, Skype Mobile lets you make free calls and send instant messages to fellow Skype users. You can also call non-Skype landlines and cellphones using Skype Credit, a fee-based service that charges pennies per minute for international calls.

Skype offers several mobile versions, including Skype for the iPhone and iPod Touch, Skype Lite for Java and Android phones, and Skype for Windows phones.

The application for the iPhone and iPod Touch most closely resembles Skype’s familiar desktop program. Though I could send text-based chat messages to my Skype-using friend in Belgrade over AT&T’s 3G network, I needed to connect the phone to a Wi-Fi network to make a call. (You currently cannot make Skype or other Internet-based calls on the iPhone via AT&T’s 3G network, though that could change soon.) After a simple tap of the call button, I could clearly hear his familiar accent without any noticeable lag or choppiness.

Similarly, a call I made to a friend’s cellphone in Senegal using Skype Credit was crystal clear in sound and connected in only 15 seconds. We chatted for 10 minutes, which cost me only $2.40. That same call on AT&T, even if I signed on to its international calling plan (which costs $4 a month), would have cost $8.80. Without the international calling plan, the fee would have climbed to $27.80.

For those without iPhones or Windows Mobile devices, Skype provides its Skype Lite application. Skype Lite cannot make calls over Wi-Fi or 3G networks, but instead routes calls through a local cellphone number.

It isn’t as complicated as it sounds: when using a MyTouch 3G phone, I selected a Skype contact in London. The application started the phone’s dialer and automatically routed the call to a local number. My British pal came through clear and static-free.

One thing to remember is that while calls made with Skype Lite are local and your carrier won’t exact a long-distance fee, you are technically making a call. So those calls will count against the minutes in your calling plan.

FRING Picking up where Skype Mobile leaves off, Fring provides an even richer experience on more phones. It supports calling over Wi-Fi and 3G on Android and Nokia devices; iPhone 3G calling is on the way. In addition to free calling to Fring members anywhere in the world, the service connects to Skype, Google Talk and MSN Messenger contacts.

After installing the Fring application from the Android Marketplace on Sprint’s HTC Hero, I tapped into my Skype account to call my Belgrade friend over Sprint’s network. Since I didn’t need to be in a Wi-Fi hotspot, I made the call while walking down a noisy New York street.

Unfortunately, because 3G data networks weren’t built for packets of data as fast-moving as a cellphone call, the connection was weak and kept fading in and out. When I was standing still, the call was slightly clearer but like a dialogue between in-studio anchors and on-the-ground news correspondents, there was a noticeable lag in the conversation.

That all disappeared when I connected the Hero to a Wi-Fi network; we talked for five minutes with no interruptions or delay.

If you are a fan of Skype’s desktop video-calling service, you may be wondering when it will be appearing on its mobile app. Fring’s already beaten Skype to the punch on this feature. The company recently updated its iPhone application with one-way video calling. “One-way,” because the iPhone doesn’t have a front-facing camera — so you can see your caller but your caller can’t see you.

TRUPHONE Truphone, which works a bit differently from Skype and Fring, is available for a number of devices including the iPhone, the iPod Touch and Android, Nokia and BlackBerry handsets.

Truphone doesn’t have a 3G calling option, but offers calling over Wi-Fi for Android, Nokia and iPhone handsets. The company offers Truphone Anywhere, a service similar to Skype’s Lite application that routes long-distance calls first over a local number and then via the Internet for lower rates.

Though Truphone permits you to sign into your Skype account and call Skype users, you can also make free calls to other Truphone users. When I called a Truphone friend in London on his cell using a Wi-Fi network, call quality was decent and there was no background hissing.

Blending the functionality of both Fring and Skype, I discovered the true beauty of Truphone when I ventured outside of Wi-Fi territory and was able to automatically call Truphone users and international numbers by using my phone’s own dialing capabilities. Although I needed to buy Truphone credit, the call was routed over a local number and then to Truphone’s network.

What’s the benefit of that, rather than it switching to 3G like Fring? Much better call quality. Just as with Skype Lite, when I dialed my friend in Israel, Truphone called a local New York City number, and connected me to her cell. Her voice was as clear as if she was sitting right next to me.

Clearly, making a choice about which service to use to reduce the cost of international calling will depend heavily on what cellphone you have and whether you have easy access to a Wi-Fi network.

But no matter which option you select, you will definitely save some money. AT&T may have heavily charged my parents one time for their globetrotting calling habits, but with so many new and cheaper options, that won’t happen again.

2010-01-04T13:37:00.000-08:00

A wealth of Tax and property related information for the first time home buyer can be found at:

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

Homebuyer Credit Expanded and Extended

The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

The new law also:

Authorizes the credit for long-time homeowners buying a replacement principal residence.
Raises the income limitations for homeowners claiming the credit.

News release 2009-108 has the details, as do two new IRS videos in English and Spanish.

Members of the military, Foreign Service and intelligence community serving outside the U.S. should also be aware of new benefits in the law that apply particularly to them.

Following is general information for first-time homebuyers who settled on a new home on or before Nov. 6, 2009.

For 2008 Home Purchases

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010. [Added Nov. 12, 2009]

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.

General Information

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

Applies only to homes used as a taxpayer's principal residence.
Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405, which you file with your original or amended tax return.

Questions and Answers

More information is available in the question and answer section.

Related Items

IR-2009-83, First-Time Homebuyer Credit Provides Tax Benefits to 1.4 Million Families to Date
The American Recovery and Reinvestment Act of 2009: Information Center

2010-01-04T13:19:00.000-08:00

Cities where homes have lost the most value

Far-flung suburbs particularly hurt by glut of new housing built during boom

By Francesca Levy

http://www.msnbc.msn.com/id/34644840/ns/business-real_estate

Merced, Calif., is a quiet, residential city an easy drive from Yosemite National Park and Pacific Coast beaches. It's also a perfect case study for the aftermath of the housing crisis.

Homes at the median level in Merced have lost 62 percent of their value from the second quarter of 2006, when they peaked at $336,743, the biggest drop anywhere in the country, according to data provided to Forbes by Local Market Monitor, a Cary, N.C.-based real estate research firm. Earlier, home building and buying grew exponentially in Merced, but the metro now suffers from a whopping 16.4 percent unemployment rate, according to the Bureau of Labor Statistics, reflecting a drop-off in building industry jobs and a grim housing market.

Providence, R.I., where values sank the most in the Northeast; Detroit, the hardest-hit market in the Midwest; and Port St. Lucie, Fla., the biggest loser of value in the South, have also suffered from their local market's slide.

It's not news that Las Vegas, where value has dropped 48 percent, Miami (down 38 percent), and Orlando (down 31 percent) saw a burst of homebuilding fueled by bad loans and rampant house flipping between the years of 2002 and 2006, and that those building bubbles subsequently collapsed. But it's the exurban cities just outside of easy commuting distance from the most desirable West Coast and Sunbelt metros where home values have taken the biggest pounding.

In many of these relatively affordable bedroom communities, subprime lending was rampant. As families clamored to buy homes, prices inflated to match their exuberance. But when the mortgage market disintegrated, these outer-fringe cities were left with a glut of new housing, and the value of these once-desired homes took a nosedive. Bay area satellite cities Stockton and Modesto, where home values have dropped 54 percent and 53 percent respectively, appealed to middle-to-low income buyers — and subprime lenders.

“There was such pressure on housing in the Bay Area that people were being pushed to the outskirts, and prices went up a lot there,” says Cynthia Kroll, senior regional economist at the Fisher Center of Real Estate and Urban Economics at the Haas School of Business, University of California Berkeley. “They were areas where a lower-income population was trying to buy homes, and they were the target for subprime loans.”

To find the cities where home values fell the most, Local Market Monitor (LMM) pinpointed 10 Metropolitan Statistical Areas — as defined by the Office of Management of Budget and used by the federal government to collect statistics — in each census-defined region (Northeast, South, Midwest and West) where the Federal Housing Finance Agency's Home Price Index had fallen the most from that market's peak, to the third quarter of 2009. The FHFA index is derived from data on all mortgages bought or backed by Fannie Mae and Freddie Mac.

The numbers show that housing markets at the heart of the boom on the West Coast and in Florida had much farther to fall than in the Midwest and Northeast, where most of the damage to values was done by rising unemployment and deteriorating business environments in the wake of the financial crisis.

On average, markets on the West Coast have lost 21.6 percent in home values since their peaks, and Florida alone lost 31 percent. By contrast, the Northeast lost an average of 8.6 percent and the Midwest only 5.6 percent. To put it another way, Merced, the biggest loser of value in the West, and in the country as a whole, lost 45 percentage points more in value than the biggest loser in the Northeast, and 32 percentage points more than the biggest in the Midwest.

There is also a broad spread in how early the decline began in different cities. Although the national peak in home prices occurred in the second quarter of 2006, according to Case Shiller, individual markets, such as Ann Arbor, Mich., peaked as early as the second quarter of 2005 and as late as the third quarter of 2009 in a number of Texas and Iowa metros. The tide changed during the same quarter in markets scattered around the South and Northeast, proving that cities underwent housing recessions timed as much by local economic factors as the national climate.

“There are timing differences here,” says Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School. “There are regions that went into the recession earlier, and those are coming out earlier.”

The cities that lost the most home value in the South are, unsurprisingly, concentrated in the Sunshine State, where exuberant developers went on a construction binge, unfettered by strict zoning restrictions. Port St. Lucie, the city with the greatest value loss in Florida (46.4 percent), and a striking example of the overzealous building in the state, seemed almost to spring up whole during the housing boom. New homes began, in the 1990s, to occupy what had previously been a desolate tract of sand, and prefabricated communities sprang up in earnest as the housing market heated up. Similarly, the retirement and resort communities of Cape Coral, where homes are down 46.4 percent from their peak and Naples, where they're down 44.6 percent once showed seemingly endless promise to builders. Those metros now feel the pain from that era's speculation.

“In Florida, it's not a pretty situation,” says Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. “Without strong job growth it will take a significant amount of time to absorb that inventory.”

In the Midwest and Northeast, however, the loss of home values is a slightly different story. Here, the financial pummeling taken by the entire country sent values sinking, but because subprime lending and overbuilding were less prevalent, home prices didn't shoot up as dramatically, and didn't have as far to fall. Most housing woes here were a result of long-building economic distress and a declining manufacturing industry. That is evident nowhere more than in Detroit, where housing prices peaked early, in the second quarter of 2005, and began a dramatic slide in tandem with its sinking auto industry. Home values there are down 31 percent.

By Francesca Levy

http://www.msnbc.msn.com/id/34644840/ns/business-real_estate

2009-12-14T08:03:00.000-08:00

Cool site for state by state tax rebates regarding energy saving efforts: Database for State Incentives for Renewables & Efficiency

http://www.dsireusa.org/

For federal credit allowances and guidelines see IRS form 5695 entitled Residential Energy Efficiency Property Credit

http://www.irs.gov/pub/irs-pdf/f5695.pdf

Of course, the gold mine of IRS forms and info can be found at the IRS Forms and Publications page at

http://www.irs.gov/formspubs/index.html

2009-11-10T14:41:00.001-08:00

Don't discount the tax credit yet!

Last week, after the Senate gave its final and fully supportive approval on the homebuyer tax credit extension, the House of Representatives voted overwhelmingly to pass the legislation, sending the tax credit to President Obama who's final sign-off on Friday made it official.

The $8,000 first-time homebuyer tax credit, which was slated to expire Nov. 30, 2009, will be extended for contracts signed before May 1, 2010 that close before July 1, 2010. First-time buyers, who are in the process of closing now, no longer have to worry about qualifying for the $8,000 tax credit if they do end up closing after the Nov. 30 deadline. The new legislation also increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the current level.

Buyers who already own a home are also now eligible for a tax credit and the purchase of a home. The $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five consecutive years of the prior eight years. The legislation does set forth several provision including, limiting eligibility for existing homeowners to homes worth $800,000 or less, as well as making both credits available only for primary residences, not second homes or investment properties. The legislation will take effect December 1, 2009 and is not retroactive.

The original first-time homebuyer tax credit jump-started the housing market, driving home sales to the highest level in more than two yeas. The National Association REALTORS® reported sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2 percent higher than the 5.10 million-unit pace in September 2008.

Home Buyer Tax Credit Extended and Expanded

	Current	New
Effective Date	· January 1, 2009	· December 1, 2009
Deadline	· Close on or before November 30, 2009	· Contract signed before May 1, 2010, must close before July 1, 2010 · Members of the uniformed services, foreign services, and intelligence employees who served an extended service of 90 days will have until April 30, 2011 and June 30, 2011.
Amount	· First-Timers: maximum of $8,000 or 10% of sales price · Prior Owners: $0	· First-Timers: Unchanged · Prior Owners: $6,500 if lived in prior home for at least 5 years of past 8 years
Income Limit	· Individual: $75,000 · Couple: $150,000	· Individual: $125,000 · Couple: $225,000
Other Restrictions	· Home must be primary residence for at least 3 years. If home is sold or buyer moves before 3 years, must re-pay full amount of credit.	· Buyer must be at least 18 years old and not classified as a dependent for tax purposes · Home must cost less than $800,000 · New Home must be primary residence for at least 3 years following purchase. If home is sold or buyer moves, before 3 years, must re-pay full amount of credit. Exception for military, foreign services, or intelligence with extended 90 days service overseas.
How to claim	· If purchased in 2009, by amending 2009 tax return or claiming on 2010 tax return	· If purchased in 2010, by amending 2010 tax return or claiming on 2011 tax return

2009-09-15T09:35:00.000-07:00

Seven New Rules for the First-Time Home Buyer

Too many people bought too much house for too many years.

Yes, the financial system almost collapsed because mortgage bankers and brokers told lies about loan terms and loosened standards in dangerous ways, and investment bankers packaged those loans into bonds that were far more toxic than ratings agencies predicted.

But the roots of the mortgage contagion lie with all of us and our desire to own just a bit more house.

So as the one-year anniversary arrives of our near financial collapse, it’s a good time to blow up a long-standing but underexamined maxim of real estate — that you should always stretch financially when buying your first home.

No one is quite sure who came up with this idea, though suspicions rest on real estate agents or kindly parents with the best of intentions who never expected that real estate prices could fall. Whatever its origin, the economists and financial planners I spoke with this week are almost unanimous in their rejection of it.

Here’s how they dismantled the old saw — and a list of seven suggestions they offered up in its place.

START WITH THE BASICS Let’s begin with some other standards, tried and true advice that served banks and borrowers well for years, until they forgot all about them in the race to write more loans and buy bigger houses. Put 20 percent down, so you have less of a chance of owing more than your home is worth if prices fall again. Get a fixed-rate mortgage, so the biggest part of your monthly housing bill remains stable.

If you’re determined to be truly conservative, don’t spend more than about 35 percent of your pretax income on mortgage, property tax and home insurance payments. Bank of America, which adheres to the guidelines that Fannie Mae and Freddie Mac set, will let your total debt (including student and other loans) hit 45 percent of your pretax income, but no more.

That said, if you end up with an adjustable-rate loan, banks may not be concerned with whether you’ll be able to afford the maximum possible payment when the interest rate adjusts in five or seven years. But you should be worried about it.

CONSIDER YOUR INCOME The best case for stretching for a first house is that first-time home buyers in their 20s and 30s will probably see their incomes grow more quickly than older people buying their second or third home.

Harvey S. Rosen, a Princeton economics professor, finds in a forthcoming Journal of Finance article that he co-wrote with two Federal Reserve Bank economists, Kristopher Gerardi and Paul S. Willen, that the size of a house that someone buys tends to be a good indicator of what their income will be later. “People can, on average, make reasonably good predictions of their future incomes and act on them in sensible ways by buying bigger houses,” Mr. Rosen said.

Indeed, much of the mess in the mortgage market has been because of people borrowing money with loans that they didn’t understand — or betting that housing prices would continue to rise enough that they would be able to refinance their loans before the payments rose. Income overconfidence may have had something to do with it (and high unemployment worsened the problems), but it’s probably not the primary cause.

BOW TO UNKNOWNS This research is all well and good as long as you continue to work. But if you’re buying your first home before you have children, you may feel quite differently about work once you become a parent. And if you do, you may not want a mortgage boxing you in to going back to the office three months after the baby is born.

Bobbie D. Munroe, a financial planner with Fraser Financial in Atlanta, encourages younger clients in this situation to model out their budget, including any proposed mortgage, three ways — with both spouses working full time, one working part time and one staying at home for a few years. She also suggests imagining or even practicing living on one income, to see if it’s truly realistic.

“What people should do is ultimately their own decision,” she said. “But they should do it with eyes wide open.”

Even people who don’t want to have children need to consider this. Besides the obvious possibility of sustained unemployment, what about the need to escape a dying industry or an early midlife crisis that necessitates career change to stave off depression? Even government employees and medical residents who believe that their incomes are set for life ought to consider this possibility.

MAP OUT EXPENSES It stands to reason that anyone tempted to stretch for a house will be inclined to play down the expense of maintaining it. These costs are anything but ancillary, though.

For many years, Dennis G. Stearns, a financial planner in Greensboro, N.C., has been alarmed enough by clients’ unrealistic expectations that he’s maintained a home cost spreadsheet that he shares with clients shopping for houses. He also updates it periodically with aggregate, real-world data based on their subsequent experiences.

Mr. Stearns estimates that owners of a newer home that do some work for themselves but contract major work out to others will pay 3.6 percent of the original purchase price annually for maintenance and 4.5 percent if it’s an older home. So if you own a $400,000 home, your costs will probably hit the five figures each year — and may rise with inflation. These expenses will be another 20 percent or so higher if you live in a severe weather area. He does note, however, that the tax benefits of home ownership can offset half or more of these costs in some areas of the country.

BUY BEST (OR CHEAPEST) All of these caveats have given rise to some unusual strategies. Michael Kalscheur, a financial planner with Castle Wealth Advisors in Indianapolis, suggests buying the dream house you covet (if you can afford it) or an inexpensive starter house but not anything in the middle.

“If people have their heart set on something, inevitably, if they can’t afford what they really want, they buy the next best thing,” he said. “That’s absolutely the worst thing you can do. Not only do you not get what you want, but it sucks you dry.”

Why? Well, if you buy that entry-level home instead of the silver-medal home, you can save a lot more money each month after making the house payment (as long as you’re disciplined) than you would if you were paying a big mortgage toward that next best house. And all of your other housing costs will be lower, too. Then, several years later, you’re in a much better position to buy what you actually want.

STRETCH THE HOUSE Better yet, keep in mind that you don’t ever have to move from that first home — and incur all of the transaction costs associated with selling and buying and moving again.

J. Michael Collins, an assistant professor in the department of consumer science at University of Wisconsin’s School of Human Ecology in Madison, suggests paying less for a home that you can upgrade periodically when your income is stable and your savings or available credit make it possible.

In other words, stretching out your tenure in a home (and the physical boundaries of the home itself) may make more sense than stretching for each successive mortgage in a series of two or more houses.

THE EIGHT-HOUR RULE One rule about all of these rules is that it’s unlikely that every one will apply to every circumstance. Individuals and their income streams are too varied, and real estate markets are themselves unique.

When all else fails, however, you can always fall back on the eight-hour test. Whatever the size of your mortgage, you have to be able to sleep soundly at night. So if an impending loan has you stretching for the Ambien, it’s a pretty good sign that the loan is a bit of a stretch as well.

Source: NY Times

2009-06-17T13:17:00.000-07:00

Can you use the Obama 8000 tax credit for your FHA down payment?
Yes, No, Maybe So.

Last month on May 12th, Secretary of Housing and Urban Development Shaun Donovan created a fervor in real estate and mortgage industry when he announced in a speech to National Association of Realtors that FHA was working on an initiative to allow first time home buyers to use the 8000 tax credit created by the American Recovery and Reinvestment Act of 2009 (Obama 8000 tax credit) for their down payment on a new home. This was followed by a mortgagee letter related to the subject being posted on HUD’s website. Immediately real estate and mortgage professionals began to communicate this information to each other and to their clients. Unfortunately, within a couple of days, FHA retracted the announcement as there were a number of issues with the logistics and legality of the 8000 tax credit down payment plan.
In the weeks that followed, many articles were posted on the web with a variety of information regarding whether or not you could use the Obama 8000 tax credit as a first time home buyer down payment.

There was abounding speculation since FHA was quiet regarding clarification of whether or not a first time home buyer could use the Obama 8000 tax credit as a down payment. Finally, on May 29th, FHA re-issued Mortgagee Letter 2009-15 with details on how the Obama 8000 tax credit could be used by first time home buyers in conjunction with an FHA loan.
The following are highlights of the FHA program for the use of the Obama 8000 tax credit for first time home buyers:

Can the Obama 8000 tax credit be used for a first time home buyer’s down payment?
Yes, but only after the first time home buyer has provided the initial 3.5% FHA down payment. After that, additional down payment funds can come from the Obama 8000 tax credit. To be clear, a first time homebuyer can NOT use the Obama 8000 tax credit to meet the minimum FHA 3.5% down payment requirement.

Can the Obama 8000 tax credit be used to pay for the buyer’s closing costs?
Yes, a first time home buyer can use the Obama 8000 tax credit for closing costs that are normally associated with buying a home (e.g. lender fees, points, title fees, inspection fees, etc.).
How does the first time home buyer obtain upfront funds from the Obama 8000 tax credit to use to help buy a house?

FHA will permit FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities to purchase the Obama 8000 tax credit anticipated by the first time home buyer. In other words, one of the aforementioned sources can loan the first time home buyer the money they expect to get resulting from the Obama 8000 tax credit for a regulated fee. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. The source of the loan can securitize the loan as a second lien on the house and may choose to require monthly payments or not. The IRS will not allow the second lien to have a balloon payment under 10 years.

How does the first time home buyer request the Obama 8000 tax credit from the IRS?
After the first time home buyer has bought the house …
the first time home buyer can wait until next year and file IRS form 5405 “First-Time Homebuyer” along with his or her 2009 tax return.
the first time home buyer can file IRS form 5405 with his or her amended 2008 tax return.
if the first time home buyer filed for an extension to the filing of their 2008 tax returs, they can submit IRS form 5405 along with his or her 2008 tax return.
Other resources regarding the Obama 8000 tax credit for first time home buyers.
Explanation of the original 7500 tax credit created by the Housing and Economic Recovery Act of 2008.

Summary of the new 2009 Obama 8000 tax credit created by the American Recovery and Reinvestment Act of 2009 .

Answers to Frequently Asked Questions about the Obama 8000 tax credit for first time home buyers provided by the National Association of Home Builders.

Source: Best FHA Lender

2009-05-15T12:46:00.000-07:00

DON'T MISS THIS OPPORTUNITY TO CONTRIBUTE TO

THE BONNY DOON SCHOOL FOUNDATION

AND HAVE SOME FUN TOO!

2009-04-30T08:57:00.000-07:00

Many Twitters quickly become quitters…

http://www.asiaone.com/Digital/News/Story/A1Story20090430-138425.html

2009-04-30T08:51:00.000-07:00

The Tax Benefits of Homeownership
Special Studies, March 27, 2009
By Robert D. Dietz, Ph.D.

Report available to the public as a courtesy of http://www.housingeconomics.com/

Purchasing a home is typically the largest purchase and among the most important financial decision a family makes. There are numerous factors that influence the home buying decision, and among the most important are the tax benefits that help offset some of the cost of homeownership1. Previous NAHB research has discussed the federal government’s (flawed) budget measurement and policy justifications for these housing tax law provisions. This article examines how these tax benefits reduce the cost of homeownership for individual homeowners and homebuyers for certain mortgage amounts and income levels.

Using the methods developed in the paper, a household, for example, with $80,000 in annual income who obtains a $200,000 mortgage will save on average $1,765 in the first year of homeownership. By the end of the fifth year of homeownership, the household will save on average $8,607 on taxes, and this amount grows to $19,488 by the end of the average period ownership — twelve years. This stylized homeowner can expect to save $21,650 in capital gains taxation, yielding a total benefit of $41,138 over the expected period of homeownership. Further, the paper provides variants of these calculations if the analysis allows the homeowner’s income to increase with their age and labor market experience. For example, the five-year tax savings for this homeowner increases to $9,723.

The paper also considers how these numbers are increased by the existence of the temporary $8,000 first-time home buyer tax credit. In the case illustrated above, the five-year tax savings estimate increases 82% from $9,723 to $17,723.

Homeownership Tax Benefits
There are three major tax benefits for homeowners: deductibility of mortgage interest, deductibility of real estate taxes, and the capital gain tax exclusion for principal residences.2 Taken together, these benefits significantly reduce the cost of homeownership. Each represents a significant provision of law. According to the Congressional Joint Committee on Taxation, for fiscal year 2008 the tax expenditure (approximately the size of the program in terms of tax savings) of the mortgage interest deduction totals $67.0 billion, the real estate tax deduction equals $24.6 billion, and the capital gain exclusion sums to $16.8 billion.

As seen in these estimates, the largest benefit for most homebuyers is the ability to deduct home mortgage interest. The tax code permits homeowners who itemize their
federal income tax deductions to reduce their taxable income by the annual amount of mortgage interest paid on a first (and second) home, up to $1 million in total home mortgage debt. Further, taxpayers may deduct interest allocable to up to $100,000 of home equity loans.4 For the purpose of the Alternative Minimum Tax [AMT], taxpayers may deduct non-home equity loan interest from AMT taxable income as well.5 Itemizing homeowners may also deduct state and local real estate taxes paid on an owner-occupied home.

Finally, taxpayers may exclude from capital gains taxation the proceeds from the sale of a principal residence. Taxpayers are limited in the amount of gains that may be excluded from tax: $500,000 of gain for married homeowners and $250,000 for single homeowners. Recent changes in tax law reduce these maximum exclusion amounts proportionally for the amount of time the home is actually used as a principal residence. Periods of ownership prior to January 1, 2009 are treated as periods of principal residence use under a grandfathering rule included in the law.

Measuring the Tax Benefits of the Mortgage Interest and Real Estate Tax Deductions
Calculating the net benefits of the major homeownership benefits seems straightforward but can lead to overestimation if not done in the context of other income tax rules. At first glance, the monetary value of the deductions is equal to the sum of the deductions times the marginal tax rate. For example, a homeowner who deducts $10,000 of mortgage interest and real estate tax deductions and who is in the 25% tax bracket would theoretically realize a tax savings of $2,500 on his/her income tax return.

However, this calculation overstates the benefit on average by failing to account for the fact that the taxpayer must itemize in order to receive a net benefit from these deductions. Unless the sum of the taxpayer’s itemized deductions exceeds the standard deduction (the deduction available in lieu of itemization), it is not to the taxpayer’s advantage to itemize.

This itemization decision implies that a certain amount of the summed itemized deductions yields no net benefit to the taxpayer because of the standard deduction. For example, if a taxpayer in the 25% tax bracket has a standard deduction of $5,700 and a set of itemized deductions totaling $6,000, the net value of the deductions is not equal to $1,500 (25% times $6,000). Even with no itemized deductions available, the standard deduction is available to reduce tax payment by $1,425 (25% times $5,700). So the true, incremental value of the itemized deductions in this example is equal to the difference between $1,500 and $1,425 or $75. Of course, the marginal value — the value of the next dollar of deductions — is equal to 25 cents, but it is the average net value that is important in determining the realized value of the homeownership tax benefits.

Calculating an Example
We can now estimate the true tax benefits of homeownership for examples of various taxpayers. Consider a homebuyer with gross income of $60,000 who purchases a principal residence in tax year 2009 with a mortgage of $180,000. Assuming a mortgage interest rate of 5.86%, the first year mortgage interest payment is approximately equal to $10,580.7 Conservatively, assume that the buyer uses a downpayment of 20%, so the purchase price of the home is $225,000. Further assume that property taxes are equal to 1.2% of the market price.8 Thus, this taxpayer also pays $2,700 in potentially deductible state and local real estate taxes in the first year of ownership.

Assuming the taxpayer is married and files a joint return, the household could claim a standard deduction of $11,400 in 2009. Clearly, with $13,280 in itemized deductions from mortgage interest and real estate taxes alone, the taxpayer will not claim the standard deduction, thus itemizing their deductions on Schedule A of their 1040 income tax return. However, to calculate the net benefit of the housing tax deductions, we need an estimate of all the other itemized deductions in order calculate the incremental value.

Using Internal Revenue Service Statistics of Income data for 2006, we estimate the average sum of all non-housing itemized deductions by income class. For this stylized taxpayer, the estimated total is equal to $6,936 in charitable, state and local income or sales taxes, personal property taxes, and all other itemized deductions. With this information, we can calculate the taxpayer’s taxable income (gross income minus itemized deductions) and marginal income tax rate of 15%.

Now we can estimate the net value of the housing benefits. The net value is equal to the sum of itemized deductions ($13,280) minus the difference of the standard deduction ($11,400) and sum of the non-housing itemized deductions ($6,936) times the marginal tax rate of 15%. This calculation yields a net benefit for the first year of homeownership equal to $1,322.
Using this approach and adjusting the declining annual mortgage interest payment consistent with a self-amortizing loan, we can calculate average tax savings for certain income classes and mortgage amounts.9 Table 1 provides these amounts for the first year of homeownership.

(Table 1)
The example calculated above is found in the row for $180,000 in mortgage and $60,000 in borrower income. As can be seen in this table, the benefits of the tax provisions increase in terms of borrower income and mortgage amount. Nonetheless, as demonstrated in a previous article most of these benefits are claimed by middle-income homeowners ($40,000 to $200,000 AGI).

Summing over the first five years of homeownership, and adjusting for the declining mortgage interest payment over time, yields the following estimates, shown in Table 2. (Table 2)

Previous NAHB research indicates that twelve years is a reasonable estimate for the average duration of homeownership of a single dwelling. Correspondingly, the twelve-year estimates using the method in this paper are shown in Table 3. (Table 3)

Graphing three examples of these results yields the following year-by-year estimates of the tax savings of homeownership attributable to the mortgage interest and real estate tax deductions, as seen in Figure 1. (Figure 1)

Principle Residence Gain Exclusion
The final major housing tax incentive is the exclusion of capital gains for the sale of a principal residence. To calculate the benefit of this tax provision, we must forecast the average price appreciation over the average duration of homeownership. We use the average housing price appreciation rate over the prior 20 years, which includes the historic price declines of 2007 and 2008 as well as the period of unprecedented price appreciation that preceded it. This average is 4.23% according to the Case-Shiller National U.S. Home Price Index. We use a conservative estimate of the capital gains tax rate (15% under present law, despite the likelihood that it will increase to 20% in 2011) to calculate the tax benefit of the exclusion. With these parameters and assuming that the home is sold at the end of twelve years of homeownership, we can calculate the tax benefits realized by the capital gain exclusion, which are reported in Table 4. (Table 4)
Summing the benefits of the mortgage interest and real estate tax deductions with the capital gain exclusion yields the twelve-year benefit estimates shown in Table 5, which in most cases represent significant tax savings for the homeowner. (Table 5)

Lifetime Income Growth
One limitation of this approach for calculating the value of homeownership tax savings is that it assumes the homebuyer has a fixed income for the period in which they own the home. Clearly, this is not a reasonable assumption. This is important because while a homebuyer may have a relatively low income — and thus a relatively low marginal income tax rate — when purchasing a home, his/her income and tax rate is likely to grow as the homeowner ages and gains experience in his/her career. Assume the average annual income increase (at the taxpayer/homeowner level due to aging, as opposed to per capita increases for all workers) is 4%. (Table 6)
Using this approach, re-estimating the five-year table estimated according to initial borrower income yields the larger values reported in Table 6. For example, the tax savings are higher in the $80,000 column in Table 6 than they are in Table 2, reflecting homeowners who enter a higher tax bracket in the fifth year of homeownership. Consider the graph in Figure 2 which reports the tax savings for a borrower with an initial income of $80,000 who obtains a home with a $250,000 mortgage. In year five, the cumulative savings from homeownership begin to diverge because the value of the homeownership tax incentives increases as the homeowner’s income increases, which is presumably correlated with the homeowner’s experience in the labor market. At the time of sale, the difference in this example is more than $11,000 in tax savings — all due to increases in the homeowner’s marginal tax rate. (Figure 2)

Conclusion
This article has presented estimates of the financial benefits of homeownership. These savings total thousands of dollars for the period of ownership and are due to the deductibility of mortgage interest and real estate taxes, as well as the principal residence capital gain exclusion. The estimates in this paper account for the lost standard deduction that results when a taxpayer itemizes and thus reflect the incremental or true value of the housing tax incentives.
An additional tax incentive that became available in 2009 is $8,000 first-time home buyer tax credit. Including the effects of this refundable credit increases the estimates in each of these tables on average by $8,000, which represents a significant increase in the tax savings of the first five years of homeownership. For example, for a homebuyer with an income of $70,000 who obtains a mortgage $200,000 the tax savings increase from $7,718 to $15,718 — an increase of 104%. Or as another example, a homebuyer with $80,000 in income and a $200,000 mortgage can expect his/her five-year tax savings estimate to increase 82% from $9,723 to $17,723.

The combination of the standard tax benefits of homeownership combined with the temporary tax credit makes 2009 an attractive time period to purchase a home.
For more information about this item, please contact: Robert Dietz at 800-368-5242 x8285 (rdietz@nahb.com)
_________________
Footnotes:
1It should be noted that in this article “benefit” does not equate with “subsidy.” There are tax benefits for owners of rental housing as well, including interest and depreciation deductions, as well as the Low-Income Housing Tax Credit. Previous research on the home buying decision can be found here.
2There are other benefits not considered in this article, including the tax exemption for imputed-owner’s rent, the deduction for mortgage insurance, and the tax treatment of reverse mortgage proceeds.
3Joint Committee on Taxation. 2008. Estimates of Federal Tax Expenditures for Fiscal Years 2008-2012. JCS-2-08.
4 It is important to note that not all cash-out mortgage refinancing is classified as a home equity loan, in contrast to acquisition indebtedness that is subject to the larger $1 million cap. Provided the proceeds of a cash-out refinancing are used for home improvement or residential investment, such debt is not home equity debt but the more favorably treated acquisition indebtedness.
5 The calculations in this paper do not include interactions with the AMT. For more information on real estate tax statistics, consult the following article.
6 To the extent that these taxes are in fact fees assessed for a specific, targeted benefit to the home in question, such fees may not be deducted from taxable income.
7 5.86% is the 4th quarter average of 2008 from the Freddie Mac Primary Market Survey.
8 2004 American Housing Survey reported a 1.17% estimated average annual state and local rate residential property taxation.
9 This analysis assumes real estate tax payments and all other itemized deductions increase with the rate of inflation.

2009-03-31T13:23:00.001-07:00

2009-02-25T11:26:00.001-08:00

Newspaper Headline Link...

Do you want to see what's on the front page of newspapers worldwide?

You can see newspapers from all over North America as well as South America, Europe, Asia, Oceania, Africa, etc.

http://www.newseum.org/todaysfrontpages/flash/

The information changes daily with the update. Put your mouse cursor on any city (dot) on the map and the newspaper front page headlines pop up. Double click on the city dot and the page gets larger.

2009-02-10T08:01:00.000-08:00

Business News- Your Taxes

Changes, Up and Down the Ladder
By EDMUND L. ANDREWS
President Obama’s tax breaks may put money directly into the hands of people at the middle and bottom rungs of the income ladder.

Tax Tips
A Batch of New Tax Breaks on Your Home
By JAN M. ROSEN
The first-time homeowner credit and residential energy credits are among the new provisions.

Suddenly, Retirees Need a Plan B
By J. ALEX TARQUINIO
Advice from retirement planning experts geared toward current retirees and investors of all ages.

Is More Relief Ahead for Small Business?
By CONRAD DE AENLLE
The tax code offers small business owners many tax breaks to choose from, including some recent additions, and others may be on the way.

Some Balm From the I.R.S. for Those 2008 Losses
By CHARLES DELAFUENTE
Some people who lost money in the financial turmoil last year may be able to get a measure of tax relief.

Does the Tax Code Look Grayer in a Downturn?
By ROBERT D. HERSHEY JR
In a severe recession, people may be looking for loopholes in the tax code to minimize the tax hit.

2009-02-06T08:15:00.000-08:00

Trying to Help Financially Troubled Homeowners

http://www.nytimes.com/2009/02/06/business/06lend.html

By VIKAS BAJAJ and TARA SIEGEL BERNARD
Published: February 5, 2009

People seem to pass certain milestones on the road of financial desperation. First the unpaid bills pile up. Then the bank forecloses. Finally, they reach the end of the line: bankruptcy court.

Joseph A. Peiffer, a bankruptcy lawyer in Cedar Rapids, Iowa, who has represented both farmers and lenders, favors giving bankruptcy courts the power to modify home loans.
But now policy makers are talking about redrawing this map by putting the bankruptcy court before foreclosure to give people a chance to keep their homes.

It has been done before, on a relatively small scale and with some success. In the midst of the farm crisis during the 1980s, Congress gave bankruptcy judges the power to reduce onerous farm loans to reflect a steep drop in land prices.

The Obama administration and Congressional Democrats are pushing a similar idea to stem the swelling tide of home foreclosure. Yet a close look at the farm experience raises questions about how widespread any relief would be.

While the creation of a special bankruptcy workout for farmers, known as Chapter 12, helped resolve that earlier crisis, many farmers still lost their farms or had to scale them back, according to judges and lawyers who studied the effects.

If a similar allowance is provided today for Chapter 13 filings, which let homeowners keep their property while working out their debts, bankruptcy courts could help a few million homeowners. But millions more would still face foreclosure, especially if unemployment continued to rise. Credit Suisse, for example, estimates that about 20 percent of an expected eight million foreclosures could be avoided by letting judges alter the terms of home loans.

“We are making the best of a lousy situation,” said Joseph A. Peiffer, a bankruptcy lawyer in Cedar Rapids, Iowa, who has represented both farmers and lenders and favors giving bankruptcy courts power to modify home loans. But, he added, “there will still be people losing their homes.”

One of his clients, a farm family in eastern Iowa, sought Chapter 12 bankruptcy in late 1986. The family had borrowed when times were good to pay medical bills, but struggled to keep up with payments when interest rates jumped and crop prices fell. The day before the family filed its case, a lender seized half of its 350 cows. “It was sort of like a perfect storm of bad things,” Mr. Peiffer said.

The bankruptcy court eventually wrote down about 40 percent of the family’s $1.5 million debt, and today, they are still farming, according to Mr. Peiffer.

That type of resolution may help troubled homeowners avoid foreclosure, advocates say. Having a bankruptcy judge change loan terms can solve disputes that bankers and borrowers might be unable to tackle on their own, they say. And some loans could become more profitable for banks in bankruptcy than in foreclosure, where losses can be 50 percent or higher after legal and home repair costs, according to Rod Dubitsky, a Credit Suisse analyst.

Perhaps more important, a bankruptcy judge can also cut through a thicket of legal complications for mortgages packaged into securities and sold to investors, which some banks say they have no authority to modify. Some investors have threatened to sue banks if those mortgages are altered.

But the banking industry fiercely opposes the proposal to amend bankruptcy law. Officials warn that they would have to raise the price of credit to offset the cost of having to wait years to see whether borrowers successfully pay off modified loans — or slide back into default. Only a third to 40 percent of Chapter 13 personal bankruptcy filings are successful, experts say, often because people lose jobs again, become sick or get divorced.

Foreclosure might bring them less, but banks and investors would get some money right away if they seized homes.

In Chapter 12, judges could change interest rates and reduce, or “cram down,” debts secured by farmland, which suffered a boom-bust cycle in the 1970s and 1980s. The amount written down was added to other unsecured debts, like credit card balances, which are repaid cents on the dollar from money left over after living expenses and secured debt payments. Congress made Chapter 12 a permanent part of the Bankruptcy Code in 2005.

Neil E. Harl, an agriculture and economics professor at Iowa State University, found that 85 percent of the first 150 farmers in Iowa who filed bankruptcy under Chapter 12 were still farming in 1995.

But many farmers who encountered distress did not seek bankruptcy protection: from 1986 to 1997, farmers filed 19,216 Chapter 12 cases, according to the Agriculture Department — less than 1 percent of the two million family farms that existed in 1995. “As soon as everybody knew it was there,” Mr. Harl said about cram-downs, “they did the next best thing, which is to sit down and negotiate.”

Nonetheless, bankers say that Chapter 12 resulted in higher interest rates, as lenders passed on the costs of bankruptcy. The Agriculture Department estimated in 1997 that rates on farm loans increased by 0.25 of a percentage point to 1 percentage point as a result of the law.
The Financial Services Roundtable, an industry lobbying group, calculates that cram-downs may increase the cost of mortgages by up to 2 percentage points either through higher rates or bigger down payments. The restrictions on cram-downs “keeps the cost of homes low, and this bill will unravel that,” said Scott E. Talbott, its chief lobbyist.

But other experts say such estimates are inflated. Adam J. Levitin, an associate professor of law at Georgetown University who favors changing the law, said rates may only rise by 0.15 of a percentage point.

Lawmakers and lobbyists in Washington are deeply divided on cram-downs. The opposition includes Senator Charles E. Grassley, Republican of Iowa, who helped create Chapter 12. Banks, with the exception of Citigroup, have vowed to fight cram-downs, though some lobbyists have been pushing for amendments that would limit them to certain loans and would let lenders recoup losses if home prices rebound.

The Obama administration and Democrats, including Senator Richard J. Durbin of Illinois, hope to pass the measure either on its own or as part of another bill.

The measure is eagerly awaited by households like the Benitez family in Palm Coast, Fla., which hopes bankruptcy will help them keep their three-bedroom house.

Rosa Benitez, a real estate agent, and her husband, Carlos, who works in construction, have been unable to pay their mortgage since payments on their adjustable rate loan shot up in early 2008. At the same time, given the housing crash, they are making a lot less money.

“Everything started going down when the mortgage payments went up,” Ms. Benitez said. The couple owes $227,000 on their mortgage and $31,000 on a home equity line of credit, but their home is worth only $175,000. Ms. Benitez said the couple could catch up if their debt was reduced to the current value of the home.

Still, the couple, like many others, is vulnerable to falling behind again as home prices decline further. But Robert M. Lawless, a law professor at the University of Illinois who favors cram-downs, said success should not be viewed simply “in terms of dollars and cents.”

“We forget the human side of the bankruptcy case,” he said. “Sometimes bankruptcy is about the soft landing.”

A version of this article appeared in print on February 6, 2009, on page B1 of the New York edition.

2009-01-26T09:41:00.000-08:00

Circuit City to Shut Down
http://www.nytimes.com/2009/01/17/technology/companies/17circuit.html'

By STEPHANIE ROSENBLOOM
Published: January 16, 2009

Circuit City Stores, a bellwether American retailer, said Friday that it would go out of business, stripping the nation of its second-largest consumer electronics chain.

The company, which filed for bankruptcy protection in November but had hoped to emerge in a slimmed-down form, said instead that it would liquidate all its stores and assets.
Most of the chain’s 34,000 store employees will be laid off. Closing sales will begin as early as Saturday and will last until the merchandise is gone or about the end of March.
Just last week, Circuit City, with 567 stores, was in talks with two potential buyers, but it was unable to reach an agreement with its creditors and lenders.

“We are extremely disappointed by this outcome,” said James A. Marcum, acting president and chief executive of Circuit City Stores. He called the liquidation “the only possible path” for the 60-year-old company.

The demise of Circuit City, while not surprising given its declining sales, is part of a radical shift taking place in retailing. Weak chains — unable to weather the freeze-up in consumer spending and choked by tight credit markets — are closing.

The downturn comes after years of growth, when retailers — responding to a flood of demand from consumers spending borrowed money — opened thousands of stores. Now that the housing downturn and economic crisis have turned off the credit spigot and sent frightened consumers into hiding, it is becoming evident that many of those stores are not needed.
“We are incredibly over-stored in many sectors,” said Stacey Widlitz, an analyst with Pali Research. “If you don’t have the balance sheet to really weather the storm for a couple of years, then that’s it.”

Last year, a raft of retailers, including Boscov’s, Sharper Image, Mervyns, Linens ’n Things, Whitehall Jewelers and Steve & Barry’s, filed for bankruptcy protection. This week, Goody’s Family Clothing and Gottschalks also filed.

Many more retailers are expected to follow suit as they run out of working capital or are unable to refinance their debt.

Emerging from bankruptcy is harder than ever because of changes in the bankruptcy code and trouble in the credit markets, which are largely refusing to put new money into troubled companies.

Wall Street analysts said in November that the prospects of long-term survival for Circuit City were bleak. Months of declining sales sent the company over the edge, although its problems go back a decade. They include buying cheap real estate leases in inferior locations and laying off the company’s most experienced sales staff. The latter saved money, but at the price of employee morale and countless customers.

“They basically destroyed all their customer loyalty among all their best customers in one fell swoop,” said Britt Beemer, chief executive and founder of America’s Research Group.
“That was really the beginning of the end.”

The disappearance of the national chain means that in many markets consumers are running out of places to buy electronics, though shoppers are not the only ones being affected. The loss of Circuit City will probably be felt throughout the supply line as electronics manufacturers find themselves less able to negotiate prices.

The biggest electronics retailer left is Best Buy. Circuit City’s liquidation sales are likely to put pressure on Best Buy in the short run, but retailing analysts say the company will ultimately emerge with more market share.

“Even accounting for a softer economy,” said David A. Schick, an analyst at Stifel Nicolaus, “the business will go to specialty players in the sector and it will also go to mass merchant discounters.”

Analysts say they believe the biggest winner will not be Best Buy, but Wal-Mart.
Ms. Widlitz said consumers who shopped at Circuit City were more likely to defect to Wal-Mart than to Best Buy, especially at a time when Wal-Mart has aggressively built up its stable of name-brand electronics at low prices.

“This is perfect timing for them,” Ms. Widlitz said.

More Articles in Technology » A version of this article appeared in print on January 17, 2009, on page B1 of the New York edition.

2008-12-31T15:35:00.000-08:00

A rare peek at Homeland Security's files on travelers
Originally Posted by: Sean O'Neill, Monday, Dec 22, 2008, 12:12 PM

http://current.newsweek.com/budgettravel/2008/12/whats_in_your_government_trave.html?wpisrc=newsletter

The oversize white envelope bore the blue logo of the Department of Homeland Security. Inside, I found 20 photocopies of the government's records on my international travels. Every overseas trip I've taken since 2001 was noted.

I had requested the files after I had heard that the government tracks "passenger activity." Starting in the mid-1990s, many airlines handed over passenger records. Since 2002, the government has mandated that the commercial airlines deliver this information routinely and electronically.

A passenger record typically includes the name of the person traveling, the name of the person who submitted the information while arranging the trip, and details about how the ticket was bought, according to documents published by the Department of Homeland Security. Records are made for citizens and non-citizens who cross our borders. An agent from U.S. Customs and Border Protection can generate a travel history for any traveler with a few keystrokes on a computer. Officials use the information to prevent terrorism, acts of organized crime, and other illegal activity.

I had been curious about what's in my travel dossier, so I made a Freedom of Information Act (FOIA) request for a copy. I'm posting here a few sample pages of what officials sent me. My biggest surprise was that the Internet Protocol (I.P.) address of the computer used to buy my tickets via a Web agency was noted. On the first document image posted here, I've circled in red the I.P. address of the computer used to buy my pair of airline tickets.
[An I.P. address is assigned to every computer on the Internet. Each time that computer sends an e-mail—or is used to make a purchase via a Web browser—it has to reveal its I.P. address, which tells its geographic location.]

The rest of my file contained details about my ticketed itineraries, the amount I paid for tickets, and the airports I passed through overseas. My credit card number was not listed, nor were any hotels I've visited. In two cases, the basic identifying information about my traveling companion (whose ticket was part of the same purchase as mine) was included in the file. Perhaps that information was included by mistake.

Some sections of my documents were blacked out by an official. Presumably, this information contains material that is classified because it would reveal the inner workings of law enforcement.

I have grayed out other parts of the documents because they contain information, such as my passport number, that I'd rather not share. The parts I've blocked out are colored gray to distinguish from the government censor's black marker. Here's the lowdown on the records.
The commercial airlines send these passenger records to Customs and Border Protection, an agency within the Department of Homeland Security. Computers match the information with the databases of federal departments, such as Treasury, Agriculture, and Homeland Security. Computers uncover links between known and previously unidentified terrorists or terrorist suspects, as well as suspicious or irregular travel patterns. Some of this information comes from foreign governments and law enforcement agencies. The data is also crosschecked with American state and local law enforcement agencies, which are tracking persons who have warrants out for their arrest or who are under restraining orders. The data is used not only to fight terrorism but also to prevent and combat acts of organized crime and other illegal activity. Officials use the information to help decide if a passenger needs to have additional screening. Case in point: After overseas trips, I've stood in lines at U.S. border checkpoints and had my passport swiped and my electronic file examined. A few times, something in my record has prompted officers to pull me over to a side room, where I have been asked additional questions. Sometimes I've had to clarify a missing middle initial. Other times, I have been referred to a secondary examination. (I've blogged about this before.)

When did this electronic data collection start? In 1999, U.S. Customs and Border Protection (then known as the U.S. Customs Service) began receiving passenger identification information electronically from certain air carriers on a voluntary basis, though some paper records were shared prior to that. A mandatory, automated program began about 6 years ago. Congress funds this Automated Targeting System's Passenger Screening Program to the tune of about $30 million a year.

How safe is your information? Regulations prohibit officials from sharing the records of any traveler—or the government's risk assessment of any traveler—with airlines or private companies. A record is kept for 15 years—unless it is linked to an investigation, in which case it can be kept indefinitely. Agency computers do not encrypt the data, but officials insist that other measures—both physical and electronic—safeguard our records.

I wonder if the government's data collecting is relevant and necessary to accomplish the agency's purpose in protecting our borders. The volume of data collected, and the rate at which the records is growing and being shared with officials nationwide, suggests that the potential for misuse could soar out of hand. Others may wonder if the efforts are effective. For instance, I asked security expert Bruce Schneider about the Feds' efforts to track passenger activity, and he responded by e-mail:

"I think it's a waste of time. There's this myth that we can pick terrorists out of the crowd if we only knew more information."

On the other hand, some people may find it reassuring that the government is using technology to keep our borders safe. Oh, one more thing: Are your records worth seeing? Maybe not, unless you've been experiencing a problem crossing our nation's borders. For one thing, the records are a bit dull. In my file, for instance, officials had blacked out the (presumably) most fascinating parts, which were about how officials assessed my risk profile. What's more, the records are mainly limited to information that airline and passport control officials have collected, so you probably won't be surprised by anything you read in them. Lastly, there may be a cost. While there was no charge to me when I requested my records, you might charged a fee of up to $50 if there is difficulty in obtaining your records. Of course, there's a cost to taxpayers and to our nation's security resources whenever a request is filed, too.

However, if you are being detained at the border or if you suspect a problem with your records, then by all means request a copy. U.S. Customs and Border Protection is required by law to make your records available to you, with some exceptions. Your request must be made in writing on paper and be signed by you. Ask to see the "information relating to me in the Automated Targeting System." Say that your request is "made pursuant to the Freedom of Information Act, as amended (5 U.S.C. 552)." Add that you wish to have a copy of your records made and mailed to you without first inspecting them. Your letter should, obviously, give reasonably sufficient detail to enable an official to find your record. So supply your passport number and mailing address. Put a date on your letter and make a copy for your own records. On your envelope, you should conspicuously print the words “FOIA Request." It should be addressed to “Freedom of Information Act Request,” U.S. Customs Service, 1300 Pennsylvania Avenue, NW., Washington, DC 20229. Be patient. I had wait for up to a year to receive a copy of my records. Then if you believe there's an error in your record, ask for a correction by writing a letter to the Customer Satisfaction Unit, Office of Field Operations, U.S. Customs and Border Protection, Room 5.5C, 1300 Pennsylvania Avenue, N.W., Washington, D.C. 20229.

2008-12-29T09:22:00.000-08:00

2009 to Arrive Not a Second Too Soon- Yahoo.com

http://news.yahoo.com/s/space/20081226/sc_space/2009toarrivenotasecondtoosoon

Joe Rao Skywatching Columnist Space.com – Fri Dec 26, 11:33 am ET

Wait a second. The start of next year will be delayed by circumstances beyond everyone's control. Time will stand still for one second on New Year's Eve, as we ring in the New Year on that Wednesday night. As a result, you'll have an extra second to celebrate because a "Leap Second" will be added to 2008 to let a lagging Earth catch up to super-accurate clocks.

By international agreement, the world's timekeepers, in order to keep their official atomic clocks in step with the world's irregular but gradually slowing rotation, have decreed that a Leap Second be inserted between 2008 and 2009. The extra second, ordered by the world's nominal timekeeper, the International Earth Rotation and Reference Systems Service, will be marked officially at the stroke of midnight on Wednesday in Greenwich, England, the home of what is popularly known as Greenwich Mean Time (GMT) – Coordinated Universal Time (UTC) to the more technically inclined – the standard time for the planet.

So at precisely 23:59:60 at Greenwich, England, on New Year's Eve, there will be a one-second void before the onset of midnight and the start of the New Year. Wednesday will see the 24th Leap Second that has been needed since the practice was initiated in 1972, and will be the first in three years.

Keeping the Earth on time
Around the world, to satisfy the requirements of navigators, communication organizations and scientific groups, about 200 atomic clocks in over 50 national laboratories worldwide will be adjusted at local times corresponding to midnight to local times at Greenwich. On New Year's Eve, the master clock at the United States Naval Observatory will be adjusted at 6:59:60 p.m. EST, or 23:59:60 GMT.

The extra second is needed to keep the world's clocks in time with the rotation of the planet. Time measured by the rotation of the Earth is not uniform when compared to time kept by atomic clocks. Today's atomic clocks have an inaccuracy of less than one second in 200 million years.

But for various reasons – the sloshing molten core, the rolling of the oceans, the melting of polar ice and the effects of solar and lunar gravity – our planet rotates on its axis at irregular rates, and on average has been falling behind atomic time at a rate of about two milliseconds per day. It now trails the official clock by about six-tenths of a second.

As a result of this difference, atomic clocks can get out of sync with the Earth and periodically have to be adjusted. Since it's the atomic clocks that are used to set all other clocks, a Leap Second has to be added from time to time to make up the difference.

Adding the extra second between 23:59:59 on Dec. 31 and midnight on Jan. 1 will put Mother Earth about four-tenths of a second ahead of the clock, giving her a bit of a head start as 2009 begins.

Who said chivalry is dead?

How to see and hear the extra second
Today many retailers market radio clocks as "atomic clocks"; though the radio signals they receive usually come from true atomic clocks, they are not atomic clocks themselves. Typical radio "atomic clocks" require placement in a location with a relatively unobstructed atmospheric path to the transmitter, perform synchronization once a day during the night-time, and need reasonably good atmospheric conditions to receive the time signals.

If you own such a device, you might want to watch what your clock displays just before 0 hours GMT, Jan. 1, which corresponds to 7 p.m. Eastern standard time on Dec. 31. The minute beginning at 6:59 p.m. EST will contain 61 seconds. When a Leap Second was added in 2005, I watched my own clock closely during that minute as the seconds ticked off. When the final second of that minute was reached, the number "59" flashed not once, but twice!If you don't have a radio clock, you can bring up a time display on your computer by going to: http://nist.time.gov/.

You can also listen for the Leap Second by tuning in to a shortwave time signal station. In North America, the "extra tick" can be heard by listening either to station WWV out of Fort Collins, CO (see:http://us.rd.yahoo.com/dailynews/space/sc_space/storytext/2009toarrivenotasecondtoosoon/30363607/SIG=116qvno87/*http:/tf.nist.gov/stations/wwv.html) at 2.5, 5, 10, 15 and 20 megahertz or CHU in Ottawa, Canada (see: http://us.rd.yahoo.com/dailynews/space/sc_space/storytext/2009toarrivenotasecondtoosoon/30363607/SIG=10rlfpbb7/*http:/tinyurl.com/y2wa2y) at 3330, 7335, and 14670 kilohertz.

A listing of shortwave time signal stations for other parts of the world can be found here.
Should you encounter poor reception, try preparing a seconds pendulum by hanging a small weight on a string about 39.1 inches (99.3 centimeters) in length. Adjust the string length beforehand until the swings exactly match the time signal ticks. If the beeps denoting the start of each minute occur at the left extreme of a swing before the final (GMT) minute of 2008, they will be heard at the right extremes thereafter. (Although the swing amplitude will be steadily dying down, this does not affect a free pendulum's oscillation period.)Ball Drop too early?By the time the transition from 2008 to 2009 arrives in North America the Leap Second will have already been inserted into the world's timescale.

But there was a bit of confusion about all this back in 1972 when the first Leap Second to be inserted on a New Year's Eve took place. An astronomer at New York's Hayden Planetarium took a phone call that day from the engineer who was assigned to drop the famous illuminated ball in Times Square (in those days, the ball was slowly lowered using an old fashioned rope and pulley). "This can affect my job," he reportedly said. "So I want to be sure I don't drop that thing one second too soon!"

Regardless of how you use your extra second, just keep this one indisputable fact in mind: Whenever you note the time on the clock, realize that it is now – right now – later than it has ever been.

Happy New Year!

Online Sky Maps and More

Sky Calendar & Moon Phases

Astrophotography 101

Joe Rao serves as an instructor and guest lecturer at New York's Hayden Planetarium. He writes about astronomy for The New York Times and other publications, and he is also an on-camera meteorologist for News 12 Westchester, New York.

Original Story: 2009 to Arrive Not a Second Too Soon

2008-12-14T09:39:00.000-08:00

Curious about what impact a remodel project will have on your home’s value?

This article gives the 2008 report on Cost vs. Value for home repair and improvement projects as compiled by Remodeling magazine and summarized in Realtor magazine.

http://www.realtor.org/rmohome_and_design/articles/2008/0812_costvsvalue_2008?id=bcaa4b804bfb44b98fe18f66fe42bfc9&wcm_page.resetall=true&cache=none&contentcache=none&connectorcache=none&srv=page

2008-12-04T13:38:00.000-08:00

A Rush Into Refinancing as Mortgage Rates Fall
http://www.nytimes.com/2008/12/04/business/04refi.html?_r=2&th&emc=th

By TARA SIEGEL BERNARD

Published: December 3, 2008 in www.nytimes.com

The housing market may finally be getting some relief, with lower mortgage rates already encouraging refinancing and Treasury officials considering ways to entice new buyers.

Last week, the Federal Reserve announced that it would buy $500 billion in mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. Mortgage rates immediately dropped, and that led to a surge in mortgage refinancing activity for the week — even with the Thanksgiving holiday.

On Wednesday, people close to the discussions said that the Treasury had been talking with Fannie Mae and Freddie Mac about ways to drive down mortgage rates to as low as 4.5 percent. That rate is about a percentage point lower than the going rates for such loans.

Any government efforts to jump-start the housing market have a number of obstacles, the biggest being borrowers’ worries that the economic downturn will affect them. Meanwhile the best interest rates will go only to borrowers in sound financial shape. And even if the efforts go as planned, they may not help the most distressed homeowners.

Still, the jump in refinancing activity showed that there was an appetite that could be whetted by lower rates. The Mortgage Bankers Association said its refinance index, which measures refinancing activity, tripled to 3,802.8 last week from the week before. The index was also 37.7 percent higher than in the same week a year ago. It was the largest increase in refinance applications in the survey’s 18-year history, though it does not measure how many applications become loans.

Refinancing activity accounted for 69.1 percent of all mortgage applications submitted last week, up from 49.3 percent the week before.

“We did quadruple our normal volume last week,” said Bob Walters, chief economist of Quicken Loans. “We had loan officers staying past midnight to get back to all of the people that had been calling. There is still a silent majority of people who can refinance and qualify.”
Callers cited a variety of reasons for their new interest in refinancing, mortgage lenders said. But the main reason was that they wanted to lock in a lower mortgage rate and reduce their monthly costs in case they fell victim to the economic downturn. Others were looking to extract cash to pay down more expensive credit card debt, the lenders said, and some were trying to trade in their adjustable-rate mortgages for a fixed rate.

Annie Lu, 30, a nurse practitioner, said she called about refinancing when she heard that the economy was officially in a recession. She and her husband bought their house in Brooklyn about three years ago with a mortgage rate of 6.25 percent. She is hoping to qualify for a rate almost a percentage point lower. “It is good to prepare for the worst, and nobody minds saving as much as we can,” she said.

The Treasury’s consideration of additional efforts to breathe life into the housing market was first reported on The Wall Street Journal’s Web site. People familiar with the Treasury’s plans said that Treasury officials had met with top executives at Fannie and Freddie last week but that neither had been notified that any steps were taken toward putting such a plan into effect. By one account, the new program would be available only to home buyers, not to people who simply want to refinance their existing loan at a lower rate.

But those looking to refinance are already eyeing the lower rates. “Borrowers with reasonably good credit and a home that hasn’t lost too much value are going to find mortgage money plentiful and readily available,” said Brad Blackwell, national sales manager at Wells Fargo Home Mortgage.

As rates drop, more people, in theory, qualify for loans because their monthly principal and interest payments will be lower. But to qualify for the best rates, borrowers need to have impeccable credit — or a credit score of 720 or higher — as well as at least 10 to 20 percent of equity in their homes.

And while experts said they were heartened by the pickup in activity, the overall number of refinancings this year was expected to be only slightly more than a quarter of the volume at the height of the housing boom in 2003.

“It is not going to spike up rapidly or anywhere near as it has in the past because credit is still tight, the economy is still weak and there are fewer people that could refinance now than could before,” said Celia Chen, senior director of housing economics at Moody’s Economy.com. “But the decline in rates will help those that can.”

For all the renewed interest in refinancing, about 12 million households, or 15 percent of owners of single-family homes, are not eligible. Their mortgages exceed the value of their home, Ms. Chen said.

Meanwhile, entire categories of loan products have been eliminated. Subprime loans are not available along with stated income loans, where borrowers do not have to fully document their income. That has limited the options for many small-business owners and other self-employed individuals. People with inconsistent or unpredictable incomes, like those who rely on commissions, are also affected.

“You can imagine how many inquiries we get where we are done just as soon as we are done talking,” said Rick L. Dunham, vice president of Impact Mortgage Network in Mesa, Ariz., whose clients include small-business owners as well as individuals whose mortgages exceed the value of their home. “So we go to the next step and say, ‘O.K., your options are loan modification, short sale or nothing at all.’ ”

Credit standards have also tightened, which has made it more expensive — often prohibitively so — for many individuals to get a loan. Generally, individuals need a credit score of 620 to qualify for a loan, but they have to pay a fee equivalent to about 2.75 percent of the loan amount, which can translate into a rate of about 1 percentage point higher than the best rate available. In some cases, these individuals can get a better deal through the Federal Housing Administration.
“For borrowers on the fringe — low credit score, erratic documentation, high debt loads, et cetera — mortgage money may actually be available but the other terms and conditions that need to be jumped to have access to that financing make it prohibitive,” said Keith Gumbinger, vice president of the financial publisher HSH Associates.

Javier and Irina Lattanzio were motivated to refinance by the potential for monthly savings. Their strong credit history enabled them to refinance the $800,000 mortgage on their four-bedroom Manhattan apartment to a rate of about 5.6 percent. But the Lattanzios had to pay $70,000 so that their loan would qualify for conforming mortgage rates. Jumbo mortgages remain, on average, a full percentage point higher.

Edmund L. Andrews and Charles Duhigg contributed reporting.

More Articles in Business » A version of this article appeared in print on December 4, 2008, on page B1 of the New York edition.

2008-12-02T13:40:00.000-08:00

Wall Street Journal
DECEMBER 2, 2008, 9:06 A.M. ET
Cover Story
http://online.wsj.com/article_email/SB122764977315457619lMyQjAxMDI4MjA3MjYwNDI5Wj.html

The Future for Home Prices
Americans still see real estate as their best shot at wealth. It may be wishful thinking.
By JAMES R. HAGERTY

Over the past few years, Americans have had a brutal lesson in the risks of real estate. House prices have crashed more than 35% in some parts of the country, millions of people are losing their homes to foreclosure, and banks are failing.
The takeaway? Many Americans still see real estate as their best shot at wealth. In survey after survey, people expect prices to bounce back -- in some cases, as soon as six months from now.

Those hoping for a quick rebound are likely to be disappointed. Economists and other pros generally say home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years.

Down the Road
And longer term? Over the next 10 to 20 years, housing economists expect prices will rise again -- but, on average, probably not nearly as much as they've averaged over the past decade. That isn't to say that some places won't experience booms (and busts). But, the experts say, you should generally expect house prices to rise just a bit more than inflation and roughly in line with household income.

Karl Case, an economics professor at Wellesley College whose name adorns the S&P Case-Shiller home-price indexes, has studied U.S. house prices going back to the 1890s. Over the long run, he says, home prices tend to increase on average at an inflation-adjusted rate of 2.5% to 3% a year, about the same as per capita income. He thinks that long-run pattern is likely to continue, despite the recent choppiness.

Other experts make similarly modest predictions. William Wheaton, a professor of economics and real estate at the Massachusetts Institute of Technology, says he expects house prices to increase at a rate roughly one percentage point higher than inflation over the long term. Celia Chen, director of housing economics at Moody's Economy.com, a research firm, expects house prices to increase an average of around 4% a year over the next couple of decades.
Some experts say it's a bad idea to count on your home rising in value at all. People should think of their own homes mainly as places to live, not as investments, advises Kenneth Rosen, chairman of the Fisher Center for Real Estate at the University of California, Berkeley. Sure, home mortgages provide tax benefits, and most homes appreciate in value over the long run, he says, but there is always risk.

For all of those forecasts, many Americans are undaunted. Consider three surveys, all from October.

In a poll of 2,000 adults, real-estate-data provider Zillow.com found that 61% believed the value of their home would either remain level or rise over the next six months. Another survey of more than 1,000 homeowners, sponsored by real-estate-services firm Realogy Corp., found that 91% thought that owning a home was the best long-term investment they could make. And an online survey of 5,000 people commissioned by Citigroup found that just 32% believed it was a good time to invest in stocks -- but 51% said it was a good time to buy a home.

"I just believe in real estate," says Jason Schram, a lawyer in Chicago who has bought two rental properties this year at what he considers fire-sale prices. "I've seen over and over people I know build wealth through rental real estate, and that's the path I intend taking, even though it's a bit bumpy at the moment."

Location, Location
So, as homeowners and buyers look ahead, what factors will determine whether their homes are really likely to rise in value, rather than just in their dreams? What are some of the bullish signs -- and some of the bearish ones?

In the long term, house prices are driven by fundamentals that are hard to predict: immigration, birth rates, the size and nature of households, and incomes. The trick is to figure out where job and income growth will be strongest and where immigrants and others will want to live.
William Frey, a demographer and senior fellow at the Brookings Institution, a think tank in Washington, says young people and immigrants are likely to flow to Florida, Georgia, the Carolinas, Tennessee, Virginia, Nevada, Arizona and some of the more affordable interior parts of California.

These areas generally have lower housing costs than the Pacific Coast or Northeast and job growth from modern industries and leisure businesses, he says. Areas with little immigration and low growth or falling populations are likely to include Michigan, Ohio, the Dakotas, Iowa, western Pennsylvania and upstate New York, Mr. Frey says.

Hit Parade
Newland Communities LLC, a San Diego-based planner and developer of neighborhoods, employs a full-time researcher to study long-term housing demand and ranks metro areas in terms of their growth prospects. Among those near the top of Newland's hit parade are Washington, D.C., Raleigh and Charlotte, N.C., Atlanta, Dallas, Houston, Phoenix and Las Vegas, says Robert McLeod, the developer's chief executive.

All of them, Newland believes, will keep growing because they have well-diversified regional economies and other attractions, including mild climates. With the exception of Washington, they all have fairly affordable housing costs. Washington has a highly educated work force, high incomes, a stable source of government-related jobs and rapidly expanding technology firms, Newland says.

"The older industrial cities are going to suffer" from shrinking employment and forbidding weather, says Mr. Rosen of the University of California. Some Sun Belt cities, including Atlanta, also could languish if traffic jams and sprawl ruin their charms, he says.
Among metro areas that Mr. Rosen expects to do well in the long run are Albuquerque, N.M.; Boise, Idaho; Salt Lake City; Seattle; Portland, Ore.; Denver and Colorado Springs, Colo. He says those places generally offer "urban vitality" and "easy access to outdoor activities" combined with affordable housing and good job-growth prospects from modern industries, such as biotechnology.

Still, just looking at population trends isn't enough. Prices in the crowded coastal areas tend to be more volatile, rising and then falling much faster during booms and busts than do inland areas, Mr. Case notes. Shortages of land and building restrictions make it hard for builders to respond quickly when demand for housing rises in coveted neighborhoods near the coasts; further inland, it's usually much easier to find vacant homes or land, and so sudden movements in prices are less likely.

For instance, despite rapid growth, home prices in Texas cities have tended to climb only gradually. Those cities typically have plenty of room to sprawl, and Texas regulates land use less strictly than many other states. Supply swells to meet demand.
Stephen Webster / Wonderful Machine

The Wonder Years
What's more, no one can assess the outlook for housing without considering the effects of 78 million aging baby boomers. For instance, some housing experts believe the boomers will be much less likely than their parents to settle for sun and golf in their retirement; they may prefer urban settings with lots of cultural life or to live nearer friends and families. That could mean higher demand -- and increased prices -- for housing in urban neighborhoods.
Most of this is just guesswork, though. "A lot of people have theories about the baby boomers," says Mr. Frey, the Brookings demographer, but boomers always have tended to confound expectations.

Dowell Myers, a professor of urban planning and demography at the University of Southern California, warns that the retirement of boomers over the next two decades is likely to depress house prices in many areas. As boomers relocate to retirement homes and cemeteries, there will be a lot more sellers than buyers in parts of the country, he says.
"It's going to really mess up the housing market," says Mr. Myers. He predicts that this "generational correction" will be larger and longer-lasting than the current slump.
To get a sense of the effects of aging boomers, Mr. Myers looks at the number of Americans 65 and over per 1,000 working-age people. He sees that number soaring to 318 in the year 2020 and 411 in 2030 from 238 in 2000.

Many people over 65 buy homes, of course, but as they get older they become more likely to sell than buy. People aged 75 to 79 are more than three times as likely to be sellers than buyers, Mr. Myers says.

In some areas, younger people will be happy to buy (and probably renovate) those boomer nests. The problem, Mr. Myers says, will be in places where lots of older people are selling and few young people are settling down. He says the effects will be strongest in the "coldest, most congested and most expensive states rather than the high-growth states of the South or West." Among the states where Mr. Myers sees downward pressure on prices within the next decade: Connecticut, Pennsylvania, New York and Massachusetts.

Of course, applying demographic trends to house-price forecasts can be hazardous. Economists N. Gregory Mankiw and David Weil predicted in a paper in 1989 that demographic trends would lead to a "substantial" fall in real, or inflation-adjusted, home prices over the next two decades "if the historical relation between housing demand and housing prices continues." They reasoned that baby boomers were coming to the end of their prime house-buying years and that the smaller baby-bust generation would bring lower demand for housing.
That warning proved, at a minimum, premature. Despite the recent drop, the average U.S. home price is up about 35% in real terms since the end of 1989, according to the Ofheo index. Messrs. Mankiw and Weil both declined to comment.

Few people who invest in housing have time to follow these academic debates. For nearly four decades, Rich Sommer and his wife, Carolyn, have been investing in rental properties in and near Stevens Point, Wis. Mr. Sommer describes real estate as a good way "to get rich slowly." He and his wife, both former schoolteachers, gradually have built their net worth from zero to around $2.5 million through their rental properties. They have dealt with countless plumbing emergencies, evicted deadbeats and even once had to clean up after a suicide in one of their properties.

Still, he hasn't been hit very hard by the real-estate crash, in part because the Midwest is much less vulnerable to booms and busts than coastal areas. When asked what he would do if someone handed him $1 million today, Mr. Sommer doesn't hesitate: He would put it into real estate.—

Mr. Hagerty is a staff reporter for The Wall Street Journal in Pittsburgh.

Write to James R. Hagerty at bob.hagerty@wsj.com

2008-11-12T16:31:00.000-08:00

Taxation of Foreclosures and Short Sales

--------------------------------------------------------------------------------
Copyright© 2008, CALIFORNIA ASSOCIATION OF REALTORS® Article Dated 11/12/08

Introduction

It has been some time since the real estate industry, on a large-scale basis, has had to deal with foreclosures, deeds in lieu of foreclosure, short sales and other distress sales of real property. Unfortunately, distress sales of real property, resulting from a convergence of tightening credit, falling property values, and the consequences of prior lending practices, are all too common currently and do not appear likely to end any time soon.

Seemingly adding insult to injury, owners of real property facing a distress sale, and generally already under financial strain, may be unpleasantly surprised to learn that two types of taxable income can result from a foreclosure, deed in lieu of foreclosure, or short sale: capital gains and forgiveness of debt (cancellation of debt) income. Both types of income can trigger unexpected taxes for the owner.

This legal article discusses the income tax consequences to the borrower in the event of foreclosure, the event the borrower simply transfers title to the lender (deed in lieu of foreclosure), and if the borrower sells the property to another in a short sale in which a lender accepts less than the balance due on the loan as payment in full.

Q 1. Are foreclosures, deeds in lieu of foreclosure, and short sales subject to federal tax income taxation?

A Yes. However, the income is taxed differently depending on several factors, including whether there was a foreclosure, a deed in lieu of foreclosure given to the lender, or a short sale (a sale where the lender agrees to reduce the amount owed in order to facilitate a sale), and whether the underlying debt is ?recourse? (the borrower is personally liable for the debt) or ?nonrecourse? (the borrower is not personally liable for the debt).
For federal income taxation as a result of foreclosure, see generally 26 U.S.C. §§ 1001 through 1016. For federal income taxation of short sales, see generally 26 U.S.C. §§ 61, 108 and 1001 through 1016.

TAXATION OF FORECLOSURES OR DEEDS IN LIEU OF FORECLOSURE

Q 2. What is the difference between a foreclosure and a deed in lieu of foreclosure?

A A foreclosure refers either to a trustee's sale foreclosure (not a judicial proceeding) or to a judicial foreclosure (a judicial proceeding). A deed in lieu of foreclosure means that the lender has agreed to accept title to the property and the borrower transfers title to the lender rather than waiting until the lender forecloses on the property. A deed in lieu of foreclosure is not a special instrument. It is simply a conveyance of the property to the lender by grant deed or quitclaim deed; and, in exchange, the lender cancels the promissory note secured by the real property. In this way the lender can avoid the foreclosure process to regain title to the property.

However, a borrower cannot simply transfer title to the lender without the lender's permission. Because some lenders have refused to negotiate and accept the deed in lieu of foreclosure, some creative homeowners have quitclaimed the property to the lender anyway, and have recorded the instrument without the lender's permission.

In 1993, the California legislature passed a statute to protect lenders from involuntary (and invalid) transfers of real property to the lender. The lender must record a "notice of nonacceptance of a recorded deed" in the county where the real property is located. Redelivering a grant of the real property back to the original homeowner (e.g., borrower) does not legally retransfer the title. (Cal. Civ. Code § 1058.5.)

A lender may not want to take a deed in lieu of foreclosure because taking title in this manner does not extinguish any junior liens. A foreclosure by a senior lienholder essentially wipes out all junior liens.

Q 3. How does the owner receive "income" from a foreclosure or a deed in lieu of foreclosure?

A A foreclosure proceeding, whether through a trustee sale or judicial foreclosure, and a deed in lieu of foreclosure given to the lender are treated the same as a sale for income tax purposes. The foreclosure or deed in lieu of foreclosure is reported on the taxpayer's tax return as a sale or exchange in the year the foreclosure is finalized or the deed in lieu of foreclosure is given to the lender.

In a foreclosure or deed in lieu of foreclosure, the owner can receive "capital gain or loss" as in any other sale of real property (i.e., be subject to capital gains taxation or receive a credit for a capital loss). Additionally, the owner can receive "forgiveness of debt" income. This is also referred to as "cancellation of debt" income. Whether the owner is subject to taxation on this income may depend on whether the debt is "recourse" or "nonrecourse." If the debt is a recourse debt, the owner may be deemed to have received taxable income in the amount of debt that is forgiven by the lender (except in certain situations discussed below where the owner will not be taxed). If the debt is nonrecourse debt, there is no taxable income from forgiveness (or cancellation) of debt, but the owner may be still be subject to capital gains taxation.

Q 4. What is "nonrecourse" debt?

A Under California law, a debt is considered "nonrecourse" when a loan is made under either one of the following two circumstances:

(1) When the loan is made to purchase a one-to-four unit property and the borrower intends to occupy at least one of the units, or

(2) When the seller carries back financing for all or a portion of the purchase price of any real property.

(Cal. Code Civ. Proc. § 580b.)

In the event of default by the borrower, the lender, or financing seller, is restricted to recovering the property with no right to proceed against the borrower for any deficiency should the property be worth less than the loan amount.

Q 5. What is "recourse" debt?

A Under California law, a "recourse" debt is one in which neither of the two exemptions in Question 4 occurs.

Examples of recourse debt are refinances of existing mortgages, home improvement loans, equity lines of credit, and loans other than seller financing, securing a debt for purchase of property that is not an owner-occupied one-to-four unit property. The lender is not limited to taking the property back and the borrower may be personally liable on the debt. If the lender chooses to foreclose using a trustee's sale, then the lender waives the right to go after the borrower for the deficiency despite the fact that the loan was a recourse debt. In order to go after a deficiency judgment, the lender must go through a judicial foreclosure process.

Q 6. How is the amount realized (taxable income) calculated for a "recourse" debt in a foreclosure?

A If the debt is recourse debt, meaning the owner may be personally liable for the debt, the amount realized is calculated in a two-step approach.

First, you take the difference between the Fair Market Value (FMV) of the property (usually the sales proceeds at the judicial foreclosure or trustee's sale) and the Adjusted Basis in the property. Generally, the Adjusted Basis consists of the purchase price of the property plus any capital improvements (less depreciation, if the property is investment property). This difference is the capital gain or loss. If the FMV exceeds the amount of the Adjusted Basis, then the borrower has realized a capital gain at the time of the transfer (foreclosure). If the Adjusted Basis exceeds the FMV, then the borrower has a capital loss.

Second, you take the difference between the amount of the cancelled debt (e.g., unpaid loan amount) and the sales proceeds at the foreclosure (FMV). This is the forgiveness of debt (cancellation of debt) income and it is treated by the IRS as ordinary income despite the fact that the borrower has received no cash at the time of the foreclosure.

However, if the cancelled debt amount is considered "qualified principal residence indebtedness" pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, there will be no taxation on this forgiveness of debt (cancellation of debt) income. See Question 9 for a definition of "qualified principal residence indebtedness."

RECOURSE DEBT

Example One:

1. The unpaid balance of the loan is $300,000;

2. The FMV of the property is $250,000;

3. The taxpayer's adjusted basis in the property is $200,000.

Assume the lender forecloses and will forgive the underlying debt.

Step one:

FMV ($250,000) less taxpayer?s adjusted basis ($200,000) results in capital gains for the taxpayer.

FMV
$250,000

Less Adjusted Basis
$200,000

Capital Gains
$ 50,000

Step two:

Amount of cancelled debt (amount owed on $300,000 loan) less FMV ($250,000) is ordinary income to the taxpayer.

Amount Owed
$300,000

Less FMV
$250,000

Ordinary Income
$50,000

Note: If a lender chooses to foreclose through a trustee's sale and is barred from obtaining a deficiency judgment by the one action rule under California Code of Civil Procedure Section 580d, it is likely the IRS will still consider that the underlying debt as a recourse debt and it will be subject to debt forgiveness income. (See Rev. Rul. 90-16.) However, there may be no taxation of this income under The Mortgage Forgiveness Debt Relief Act of 2007.

RECOURSE DEBT

Example Two:

If the FMV at the foreclosure sale is more than what the lender is owed, there will be no forgiveness of debt and, thus, no ordinary income to the taxpayer.

1. The unpaid balance of the recourse debt is $300,000;

2. The FMV of the property is $400,000;

3. The taxpayer's adjusted basis in the property is $200,000.

Step one:

FMV ($400,000) less taxpayer's adjusted basis ($200,000) results in capital gains for the taxpayer.

FMV
$400,000

Less Adjusted Basis
$200,000

Capital Gains
$200,000

Step two:

The debt is fully paid (since the FMV of $400,000 exceeds the unpaid loan amount of $300,000) resulting in no forgiveness of debt.

Q 7. How is the amount realized (taxable income) calculated for a "nonrecourse" debt in a foreclosure?

A If the debt is nonrecourse, meaning the owner is not personally liable for any deficiency (beyond the value of the property), the amount realized is the difference between

(a) the greater of: (i) the FMV or (ii) the entire outstanding debt; and

(b) the adjusted basis of the property.

This amount is treated as capital gains and there is no taxation for forgiveness of debt income.

Even though the adjusted basis might exceed the FMV and the outstanding debt, generally no capital loss would be allowed because nearly all nonrecourse debt is associated with a principal residence. (Capital losses are applicable only to investment property.)

NONRECOURSE DEBT

Example:

1. The unpaid balance of the loan is $300,000;

2. The FMV of the property is $250,000;

3. The taxpayer's adjusted basis in the property is $200,000.

Greater of FMV ($250,000) or entire unpaid debt ($300,000) minus taxpayer?s adjusted basis ($200,000) results in capital gains to the taxpayer.

Greater of
FMV ($250,000)
OR
Unpaid Debt ($300,000)

Greater of the above
$300,000

Less Adjusted Basis
$200,000

Capital Gains
$100,000

Q 8. How is a deed in lieu of foreclosure treated for tax purposes?

A A deed in lieu of foreclosure is treated as a sale and taxed just like a foreclosure.
See Questions 6 and 7 above.

TAXATION OF SHORT SALES

Q 9. What are the tax implications of a short sale?

A A short sale, where the lender agrees to reduce some or all of the outstanding debt, may give rise to forgiveness of debt income (also called "cancellation of debt" income). The amount of the debt that the lender agrees to write off is treated as "ordinary income" (as opposed to capital gains income which is taxed at a lower rate). Even though the lender may be taking this action to facilitate the sale by the owner who is under a notice of default and facing a foreclosure, the agreement between the owner and the lender is considered voluntary and the amount of the loan written off by the lender is treated as forgiveness of debt (cancellation of debt). The taxpayer will generally receive a 1099 tax form from the lender in the amount of the cancellation of debt.

This forgiveness or cancellation of debt which is treated as "ordinary income" under certain circumstances may or may not be subject to taxation. Under the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) signed by the President on December 20, 2007, Internal Revenue Code §108(a)(1)(E) was added and provides that a taxpayer will not be taxed upon cancellation of debt income if the following conditions are met:

. The property sold in the short sale is the taxpayer's principal residence, as that term is used in IRC §121.
. The cancellation of debt is Qualified Principal Residence Indebtedness** under IRC Section 163(h)(3)(B).
. The indebtedness is discharged after January 1, 2007 and before January 1, 2013. (The end date was increased by three years from 2010 to 2013 pursuant to H.R. 1424, the Emergency Economic Stabilization Act of 2008).

**Qualified Principal Residence Indebtedness is a loan secured by the residence used to acquire, construct or substantially improve the residence. The income relief provided is capped at $1,000,000 in the case of a married person filing a separate return and $2,000,000 for all others.

Any reduction of indebtedness excluded by IRC §108(a)(1)(E) will be applied to reduce the basis of the taxpayer's principal residence, but not below zero. This could result in a higher amount of capital gains tax owed by the taxpayer.

Recently passed California law, SB 1055, conforms California Revenue and Tax Code Section 17144.5 to federal law with the following exceptions:

(1) The maximum amount of acquisition indebtedness is reduced to $800,000 for couples filing jointly and $400,000 for individual filers;

(2) The maximum amount of debt relief income that can be forgiven is $250,000 for couples filing jointly and $125,000 for individual filers; and

(3) California’s debt relief statute applies to property sold on or after January 1, 2007 and before January 1, 2009.

Finally, if the owner has owned the property for some time and has refinanced to take out some of the equity, the owner could be subject to capital gains taxation when selling the property as well. For example, the borrower has a remaining loan on the property when the borrower refinances in order to buy an investment property (or to buy a car, to take a vacation, consolidate credit card debt, etc.) and now owes $300,000 to the lender. Thus, the taxpayer's adjusted basis may be lower than the outstanding balance on the loan (see the example below).

The tax calculation would look like step one in calculating a foreclosure sale of recourse debt.

SHORT SALE

Example:

1. The unpaid balance of the loan is $300,000;

2. The sales price (FMV) is $250,000;

3. The taxpayer's adjusted basis in the property is $50,000.

Sales price (FMV $250,000) less taxpayer's adjusted basis ($50,000) results in capital gains for the taxpayer.

Sales Price (FMV)
$250,000

Less Adjusted Basis
$50,000

Capital Gains
$200,000

Additionally, the taxpayer will have ordinary income from the lender's write off of any debt, which in this example would be $50,000 (** See the discussion above in this question to determine whether or not this would be taxable)

Loan Balance
$300,000

Less Sales Price
$250,000

Ordinary Income
$50,000

TAX EXEMPTIONS

Q 10. Are there any other exemptions from the taxation of cancellation of debt income?

A Yes. There are four other circumstances, in addition to what was discussed in Question 9 where the taxpayer can get relief from taxation on cancellation of debt income:

(1) The taxpayer is insolvent (the taxpayer's debts exceed their assets, but the cancellation of debt is forgiven only to the extent of the insolvency);

(2) The debt is discharged as part of a bankruptcy proceeding;

(3) The debt discharged is qualified farm indebtedness; or

(4) The debt discharged is qualified business indebtedness.

For all of the above, any reduction in indebtedness will be applied to reduce the taxpayer’s basis in the property.

(26 U.S.C. §§ 108(a), 108(b), 108(c) and IRS publication 908.)

Note, however, it is likely that many taxpayers currently subject to cancellation of debt income will qualify for the insolvency exemption from taxation. Taxpayers should be advised to speak with their own tax advisors as to whether they meet the insolvency exemption.

Q 11. Are there any exemptions from the capital gains taxation in a foreclosure, deed in lieu of foreclosure or short sale if the property is a principal residence?

A Yes. If the sale, whether through a foreclosure or deed in lieu or short sale, generates capital gains and if the property was the seller's principal residence, the seller may be able to use the capital gains exclusion of $250,000 if single and $500,000 if married filing a joint return. This exclusion does not apply to ordinary income from cancellation of debt.

MISCELLANEOUS

Q 12. Which is better for an owner facing a distress sale: a foreclosure, a deed in lieu of foreclosure or a short sale?

A Any of these situations will impact the owner's credit negatively. Additionally, the owner may have a significantly different tax liability depending on the disposition of the property. Consequently, this is a question that the owner needs to discuss with their own tax advisor.

Q 13. What is a quick summary of these taxation rules?

Recourse Foreclosure/
Deed in Lieu
Nonrecourse Foreclosure/
Deed in Lieu
Short Sale

Capital Gains
FMV Less Adjusted Basis
Greater of FMV or Outstanding Debt Less Adjusted Basis
FMV Less Adjusted Basis

Ordinary Income
Outstanding Debt Less FMV *
No Ordinary Income
Amount of Debt Forgiven*

*No Ordinary Income if "Qualified Principal Residence Indebtedness" (**See the discussion in Question 9)

Q 14. Does California follow the debt relief rules set forth above?

A Recently passed California law, SB 1055, conforms California Revenue and Tax Code Section 17144.5 to federal law with the following exceptions:

1. The maximum amount of acquisition indebtedness is reduced to $800,000 for couples filing jointly and $400,000 for individual filers;

2. The maximum amount of debt relief income that can be forgiven is $250,000 for couples filing jointly and $125,000 for individual filers; and

3. California’s debt relief statute applies to property sold on or after January 1, 2007 and before January 1, 2009.

Q 15. Where can readers obtain more information on the subjects covered above?

A Information is available from a variety of sources, including:

. The Internal Revenue Service (IRS) (http://www.irs.gov/), which has detailed publications available for free on many tax related subjects.
. The IRS Tele-Tax system, which is an automated voice message information system with recorded information on many commonly asked tax questions. Tele-Tax can be reached by calling 800.829.4477.
. A tax professional, such as a certified public accountant, tax attorney, or enrolled agent.

This legal article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.'s legal products and services, please visit C.A.R. Online at www.car.org.

http://www.car.org/legal/2008articles/taxation-foreclosures-shortsales/

Member Legal Services
Tel 213.739.8282
Fax 213.480.7724
October 9, 2008 (revised)

Copyright© 2008, CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) Permission is granted to C.A.R. members only to reprint and use this material for non-commercial purposes provided creditis given to the C.A.R. Legal Department. Other reproduction or use is strictly prohibited without the express written permission of the C.A.R. Legal Department. All rights reserved.

2008-10-17T11:27:00.000-07:00

Warren Buffet, consistently on the list of the world’s wealthiest individuals, wrote that he is buying American stocks right now in a letter to the New York Times which was published yesterday. Why, you ask? Read on…

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&em&oref=slogin

2008-09-26T10:59:00.000-07:00

Solar Panels Are Vanishing, Only to Reappear on the Internet

http://www.nytimes.com/2008/09/24/technology/24solar.html

Solar Panels Are Vanishing, Only to Reappear on the Internet

Solar power, with its promise of emissions-free renewable energy, boasts a growing number of fans. Some of them, it turns out, are thieves.

Global Warming,Solar Energy,Robberies and Thefts,Environment

By KATE GALBRAITH

September 24, 2008

DESERT HOT SPRINGS, Calif. — Solar power, with its promise of emissions-free renewable energy, boasts a growing number of fans. Some of them, it turns out, are thieves.

Ken Martin Jr. lost 58 panels from the roof of an office building he owns in Santa Rosa, Calif. He estimated they would cost $75,000 to replace.

Solar panels were stolen from Jim and Shayna Powell’s roof in Palm Desert, Calif.
Just ask Glenda Hoffman, whose fury has not abated since 16 solar panels vanished from her roof in this sun-baked town in three separate burglaries in May, sometimes as she slept. She is ready if the criminals turn up again.
“I have a shotgun right next to the bed and a .22 under my pillow,” Ms. Hoffman said.
Police departments in California — the biggest market for solar power, with more than 33,000 installations — are seeing a rash of such burglaries, though nobody compiles overall statistics.
Investigators do not believe the thieves are acting out of concern for their carbon footprints. Rather, authorities assume that many panels make their way to unwitting homeowners, sometimes via the Internet.
Last November, someone tried to sell solar panels stolen from a toll road in Newport Beach for $100 each on eBay. Detectives from the local police department entered the bidding and won the panels, which were worth nearly $1,500 apiece, according to Sgt. Evan Sailor, a Newport Beach police spokesman.
When Nathan Tyrone Mitchell, a resident of Santa Monica, showed up to hand over the panels, the police greeted him with handcuffs.
Mr. Mitchell, who was charged with possession of stolen property, has pleaded not guilty. His lawyer, Charles Stoddard, said that his client had bought the panels from someone on Craigslist and then tried to resell them on eBay for a profit. “Our contention is that Mr. Mitchell is just an innocent purchaser who kind of got caught up in this thing,” Mr. Stoddard said.
In Contra Costa County, detectives accustomed to handling thefts of copper began to notice solar panels going missing in the last six months, according to Jimmy Lee, a spokesman for the county sheriff’s office.
This summer, an officer on patrol became suspicious when he spotted a man trying to sell solar panels to a home builder who had advertised on Craigslist that he was seeking panels. The officer confiscated the panels and, after detectives found that they matched panels stolen from a school, a California man was charged. Mr. Lee says that law enforcement agencies are investigating about a half-dozen other solar-panel thefts in his area.
“We were surprised and kind of caught off guard” by the solar thefts, said Mr. Lee, who recommends people engrave their driver’s license numbers onto their panels for better identification.
For Tom McCalmont, president of Regrid Power, a solar installation business near San Jose, the problem hit home in late June. His own headquarters was struck by thieves, who took more than $30,000 worth of panels from the roof.
The panels were disassembled expertly, he said, leading him to suspect that someone in the solar industry had done it. He urges clients to install video cameras and alarms for their solar arrays, and likens his own revamped security system to Fort Knox.
“This is the crime of the future,” Mr. McCalmont said.
After suffering a solar theft, some victims find unusual ways to protect their property. Ms. Hoffman, of Desert Hot Springs, could not sleep for several weeks during the string of thefts from her roof.
One night, she waited beside a nearby building and watched her house in an attempt to catch the thieves, causing a suspicious neighbor to call the police. She vows that if she ever catches the culprits, “they’re not going to leave walking” — especially if she feels threatened.
So far, with the losses still modest, homeowners’ insurance is processing the claims with little resistance. Ms. Hoffman’s insurer, State Farm, is paying $95,000 to replace her entire system. She plans to install an alarm, and possibly a video camera.
Not far from Ms. Hoffman, in the town of Palm Desert, Jim and Shayna Powell were devastated after thieves took 19 of their solar panels in June, causing their electricity bill to shoot from $3 to $300 just when they needed air-conditioning the most. “Of all the times of year to steal the panels,” Mr. Powell said in frustration.
Beyond California, solar-power markets are comparatively small, so thefts are still rare — but they are spreading. In the last 18 months, Oregon’s highway department has lost a few panels used to power portable traffic message boards.
In Minnesota, the Sauk River Watershed District has lost at least eight small panels, worth $250 each, in the last few years, according to Melissa Roelike, who coordinates the water quality monitoring program there.
In response, the district has taken steps to protect the panels, including putting them in trees and atop poles. Thieves promptly stole one such panel.
“Obviously, hoisting them 20 feet in the air on a metal pipe does not work,” Ms. Roelike said.
In Europe, where the solar industry is well-established, thievery is entrenched, and measures to ward it off have become standard, including alarm systems and hard-to-unscrew panels.
But in the United States, installers are just coming to grips with the need for alarms, video cameras and indelible engraving of serial numbers. Some people fancy simpler solutions.
Ken Martin Jr. lost 58 panels, which will cost $75,000 to replace, this spring from the roof of a half-empty office building in Santa Rosa, Calif., that he owns. He is considering slapping paint on some parts of his remaining panels — bright pink paint.
“At least if someone comes across them and they’re painted, they’ll know that’s my color,” he said.
A version of this article appeared in print on September 24, 2008, on page C1 of the New York edition.

2008-09-23T11:24:00.000-07:00

Reducing Your Risk in the Troubled Economy

Government bailouts, the stock market plummeting, rising unemployment rates.... The current state of the United States economy is anything but secure.

There is no such thing as 'risk free' when it comes to your finances, of course; but watching the news as things seem to fall apart can be unsettling, if not frightening.

According to Ron Lieber of the New York Times, however, there are a few moderate steps--"a middle path of sorts"--each of us can consider to help reduce our personal risk without making "drastic changes."

Here are a few of Lieber's suggestions:

If you're under 50, don't pull out of the stock market all together. Maintain "consistent exposure to more risky investments" in order to protect yourself from "the biggest investment risk of all, outliving your savings."
Look into starting your own business on the side, while maintaining your day job, thus "spreading out your income risk."
Pay more than the minimum on your monthly mortgage bill. You'll be ridding yourself of extra debt, and you will pay off your mortgage ahead of schedule.
"Split your life insurance policies and annuities among more than one provider."

For more tips, click here to read the article in its entirety.

2008-09-09T12:20:00.000-07:00

What the Mortgage Takeover Means for You

Ron Lieber of the New York Times explains in plain English why the seizure of Fannie Mae and Freddi Mac took place, and explores what effect it will have in the areas of:

Mortgage Rates
Home Prices
Old Loans
New Loans, and
Investors

Click here to read the article in its entirety and find out what this unprecedented event has to do with you, the consumer.

2008-09-09T11:57:00.000-07:00

More on the Fannie Mae, Freddie Mac Takeover

Curious about what happened during the days leading up to the dramatic seizure of mortgage giants Fannie Mae and Freddie Mac by the U.S. government?

Click here for a blow by blow of the final weeks before the takeover.

Courtesy of the New York Times