Senate Bill on Key HousingTax Policies

The rap on the current Congress is that it can't overcome partisanship, can't move bills, can't do diddly-squat on budgets or tax policy. That reputation is richly deserved and has hurt the national economic recovery and done nothing to help housing.

But now and then, something odd happens. Republicans and Democrats come together and agree on legislative proposals that have the potential to stimulate economic growth and directly assist millions of taxpayers who are also homeowners. The Senate Finance Committee -- one of the two key tax-writing bodies on Capitol Hill -- did precisely that before heading home for vacation with a strong, 19-5 bipartisan vote on legislation extending or reviving 50-plus tax code provisions, several of which have important implications for housing.

The bill would preserve the mortgage debt forgiveness tax exemption that is scheduled to expire Dec. 31; bring back the popular home energy efficiency improvement write-offs that expired last December; revive the now moribund tax deduction for mortgage insurance premiums paid in connection with FHA, Fannie Mae, Freddie Mac, VA and USDA Rural Housing low down payment programs; and extend the alternative minimum tax (AMT) "patch" retroactively for 2012 and continue it into 2013. Without the patch, millions of small-business owners and professionals are likely to pay higher federal income taxes this year and next.

The Senate committee's bill is expected to hit the full Senate floor for a vote -- likely in favor -- after the Senate returns Sept. 10. Then it goes to the House, where it could either be taken up in the following several weeks or left for action after the election. Since the Senate's vote represents the first positive, bipartisan move for real estate on a tax bill in years, here's a quick overview of what it would do if it makes it out of the House in roughly similar shape and goes to the president for signature.
  • Mortgage debt forgiveness. Since early this year, I have received what must be several hundred emails from homeowners and REALTORS® asking essentially the same question: Could Congress be so dumb as to let the vitally important current tax code exemption for homeowners who've had their principal mortgage debts reduced by lenders expire? Could the federal government insist, in effect, that the Internal Revenue Service hit people when they're down by treating the amounts forgiven in loan modifications, short sales, foreclosures and deeds-in-lieu as ordinary income, subject to crushing tax burdens?
As a matter of fact, the answer is yes. There are members of Congress who view the Mortgage Debt Forgiveness Act of 2006 as just another form of government bailout -- forcing taxpayers who never fell behind on their loans to subsidize homeowners who stopped paying their mortgages, for whatever reason.

Political analysts including Douglas Holtz-Eakin, chief economic adviser to John McCain's 2008 presidential campaign and a former director of the Congressional Budget Office, told me earlier this year that extension of the debt forgiveness law is "not a sure thing" by any means, and could easily become a victim of the end-of-the-year battles over the federal debt, deficit and budget -- the "fiscal cliff" when the Bush tax cuts expire and heavy expenditure reductions are imposed on the defense budget and social programs.

Sen. Max Baucus, chairman of the Finance Committee, expressly sought to insulate issues such as mortgage debt forgiveness from the expected year-end craziness by including it in the extender bill that just passed. If the National Association of REALTORS® can redouble its successful lobbying efforts in the House, Baucus' strategy just might work. Thousands of underwater owners heading for foreclosure or seeking principal cancellation through the $25 billion, multistate robo-signing settlement certainly have good reason to hope so.
  • Energy efficiency write-offs. Remember those federal tax credits that homeowners could get when they installed new energy-conserving windows, doors, roofs, heat pumps, insulation and the like? Well, they expired last year and currently are unavailable for tax year 2012. But the Senate committee's bill would bring them back for this year and through 2013. Not a game-changer, perhaps, but definitely a money-saver to large numbers of homeowners and a plus for the environment.
  • Mortgage insurance premium write-offs. This is another tax benefit that expired last December, but has special significance for a key segment of the housing marketplace: first-time buyers, minorities, and moderate-income buyers who lack big down payment cash. Under previous tax law, buyers who paid FHA or private mortgage insurance (PMI) premiums, VA guaranty or USDA Rural Housing fees were able to deduct them -- just like mortgage interest -- if their incomes did not exceed specified thresholds ($100,000 for married taxpayers, $50,000 for single filers, with a graduated phaseout up to $110,000 and $55,000, respectively). In the most recent year when IRS data was available, 2009, homeowners claimed $5.5 billion in deductions.
  • AMT "patch" extension. The alternative minimum tax "patch" that has spared large numbers of small-business owners, REALTORS®, investors and others from higher tax bills no longer is in force. It expired last December. The Senate bill would revive it for 2012 and next. If that effort fails, some estimates indicate that as many as 25 million additional taxpayers could be hit by the AMT -- not a welcome development in a sluggish economic environment.
 Source: Inman News

Top ten strategies for improving your credit score

If you are considering either buying or renting a new home, your credit score can play a big part in how successful you will be in your quest. Here's some tips to help you out.

1. Learn what your current FICO credit score is and what appears on your credit report. You’re allowed one free credit report from each of the three credit reporting bureaus, accessible at When you pull your report, you can also pay a small fee to see your credit score. If you’ve used up your freebies for the year, "Score Power" can give you immediate access to your Equifax Credit Report, which includes your current FICO credit score.

2. Don’t open new credit cards that you don’t need just to increase your available credit. This approach could backfire and could lower your score.

3. Try to keep your total account balances as low as possible. High outstanding debt may negatively affect your score, as you have a greater chance of missing payments.

4. Check your report for inaccurate information and correct any mistakes. Incorrect information on your credit report is a warning sign for identity theft, which can be very damaging to your credit score. Check out more information for preventing and recovering from identity theft.

5. If your credit is severely damaged, or if you have a very short credit history, there are still ways to improve your creditworthiness over time. Consider opening new accounts responsibly and pay off debt on time.

6. If you fall behind on paying a bill because of illness, unemployment, or family issues, write a short explanation to the credit reporting agencies. They will add it to your credit report. It won’t improve your credit score directly, but creditors may take your personal statement into consideration when evaluating you. Also, call your creditor to explain the circumstances and, if possible, work out a payment schedule you can meet.

7. If you need help managing your credit, contact a reliable nonprofit credit counseling agency. Find an agency in your area through the National Foundation for Credit Counseling.

8. To minimize the number of inquiries on your credit report, don’t apply for multiple credit cards over a short period of time, and don’t apply for a card you’re not likely to get. Apply for new credit accounts only as needed.

9. Make all of your payments on time. If you are forced to miss a payment, be sure to pay it the following month along with the current payment. Past due accounts will be listed on your credit report. If you have missed payments, get current and stay current. As a general rule, the longer you pay your bills on time, the better your score.

10. The most important step is to continue to check your credit report regularly, charting your progress along the way. Everyone’s financial situation is different and all credit reports are different as well. Monitor your credit report for how certain activities affect your credit score. Keep an eye out for false information and identity theft. And watch and see how positive activities like on-time payments and a good mix of credit accounts will raise your credit score over time.

Source: Equifax

‘Normal’ Home Sales Becoming More the Norm

Marketshare of non-distressed homes are at their highest level since August 2008, a sign of strengthening demand from buyers realizing their time has come to act before prices increase further due to a slowly improving employment picture and greater consumer confidence. During the January to June period, the number of non-distressed sales is up 15 percent over the same period last year, according to CoreLogic.

The increase in non-distressed sales is strengthening prices. Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 3.2 percent in June 2012 compared to June 2011. On a month-over-month basis excluding distressed sales, home prices increased 2.0 percent in June 2012 compared to May 2012, the fifth consecutive month-over-month increase., according to the National Association of REALTORS®.

Both supply and demand are playing a role in the decline of distressed sales and the increase in normal sales. In June, the distressed share of sales fell to 21 percent, the lowest level in almost four years. The months’ supply of distressed properties has been steadily decreasing over the first half of the year and now stands below seven months, equaling the same level of the supply of active listings.

Increased competition for the limited inventory of non-distressed property listings helped push the average home sales-to-listing price ratio to 95.6 percent in June, the highest in three years, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.

HousingPulse reports that median time on market to sell a non-distressed listing fell sharply in June to 11.7 weeks, a drop of a full week from the May reading of 12.7 weeks. As recently as March, the non-distressed property time on market had been 14.0 weeks. The June 2012 time on market for non-distressed listings is the lowest in over two years and substantially below the June 2011 reading of 15.0 weeks.

“Strong demand, particularly in areas of California, Arizona and Nevada, are pushing up home prices very quickly in the short-term. And because many of the home purchases in these areas are cash transactions, there appears to be less braking of prices by our current appraisal system than seen in other parts of the country,” notes Thomas Popik, research director for Campbell Surveys and chief analyst for HousingPulse.
Demand for normal homes is increasing despite the fact that buyers face serious hurdles.

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Is it Cheaper to Rent or Buy?

Despite the rising number of renters across the country, it is cheaper to buy a home rather than rent one in 72 percent of the 50 largest cities in the U.S., according to an index released by real estate search and marketing site Trulia.

"Since the start of the 'Great Recession,' many former homeowners have flooded the rental market. Following the principles of supply and demand, renting has become relatively more expensive than buying in most markets," said Pete Flint, CEO and co-founder of Trulia, in a statement.

"Though necessary for achieving true economic recovery, stricter bank lending practices have also further aggravated the struggling housing market in the short term. Even highly qualified homebuyers face intense scrutiny on their income, savings, existing debt and credit history before they can get a mortgage loan."
Trulia's rent vs. buy index compares the median list price with the median rent on two-bedroom apartments, condominiums and townhomes listed on as of Jan. 10, 2011.

A price-to-rent ratio of 1 to 15 means that it's much cheaper to buy than to rent in a particular city. A ratio between 16 and 20 means that it's more expensive to rent than to buy, but, depending on the family's situation, buying could "make financial sense," the site said. Any ratio above 20 indicates that owning is much more costly than renting in a city.

In 36 out of 50 of the country's most populous cities, buying a two-bedroom home is less expensive than renting one. These cities include many areas that have been hit hard by foreclosures, such as Las Vegas, Phoenix and Fresno, Calif.

Top 10 cities to buy vs. rent:
Rank City State Price to Rent Ratio
2.Las VegasNev.6
5.Phoenix Ariz.8
8.San AntonioTexas11
10.El PasoTexas11

In 10 cities, renting is cheaper, but buying might make more financial sense, according to Trulia. These cities include Los Angeles, Boston, and Fort Worth, Texas.

The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.

Calculations for total rental cost include rent and renters insurance. The total cost of homeownership was highest, compared to the cost to rent, in New York; Seattle; Kansas City, Mo.; and San Francisco.

Source: Trulia

National Survey Reveals Trends in Pet-Friendly Renting

Summer is one of the most popular times of the year for people to bring home a new pet, and renters are among this pack of pet lovers. A survey conducted by found 43 percent of respondents are current pet owners, with more than a quarter planning on getting a four-legged friend within the next year. However, renters need to do their homework first before bringing home a furry friend, as not all apartment buildings allow pets, and the ones that do often have fees associated with pet ownership.

Current and soon-to-be pet owners are in luck because property managers and landlords are recognizing that renting with pets is an increasing trend, and more buildings are starting to accommodate this demand. Nearly 70 percent of renters surveyed reported having no difficulties finding a pet-friendly apartment. More than half of respondents also reported having to pay a pet deposit at their current residence, with 36 percent shelling out more than $200 for their four-legged companions.

“Renters have made it clear that not accommodating a pet could be a deal breaker in their apartment search, and many apartment managers have taken this feedback into consideration and adjusted pet policies,” says Tammy Kotula, public relations and promotions manager, “There are plenty of pet-friendly options out there for renters who want to have a pet or even for those who just like the idea of being in a pet-friendly apartment community.”

The survey also found that it is not just Fido and Fifi’s owners who enjoy their pet’s company; more than 34 percent of respondents said although they do not have a pet, they enjoy living in a pet-friendly building, and 20 percent of non-pet owning renters said they avoid buildings that allow pets.

The top five most popular pets for renters are:
1. Small dog (Under 25 pounds): 35.5 percent
2. Cat: 24.2 percent
3. Large dog (More than 50 pounds): 13.6 percent
4. Medium dog (26 to 50 pounds): 11.0 percent
5. Fish: 4.3 percent
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Where is the Texas Real Estate Market Headed?

The Texas real estate market continues to show marked improvements over last year, according to the 2012 Second Quarter edition of the Texas Quarterly Housing Report released this week. Here are some highlights from the report:

The median sales price of Texas homes in the second quarter of 2012 was $161,400, which is 7.45% more than the second quarter of 2011.

The average sales price had a similar jump, up 7.13% from the second quarter of 2011, to $213,674.

In addition to statewide improvements in sales volume and price, the “months inventory” figure improved. Indicating the balance between supply and demand, the Texas market featured 5.9 months of inventory in the second quarter of 2012, which is 2.2 months less than the second quarter of 2011. 

This is good news. The Real Estate Center cites 6.5 months of inventory as a market in which demand is balanced with supply.

In the second quarter of 2012, 67,334 single-family homes were sold in Texas, which is 13.04% more than the second quarter of 2011.

“Texas has been leading the economic recovery and these results are more proof that our state is one of the nation’s best places to own a home," said Chairman Joe Stewart. "Now, we must protect the high quality of life that fueled that recovery and work on absorbing the growth of our state. That is the focus of the Texas Association of REALTORS® as we once again begin preparing to advocate for Texas homeowners during the 83rd session of the Texas Legislature in 2013.