Tuesday, December 22, 2009

U.S. Economy: Home Sales Exceed Forecasts as Buyers Seek Credit

Dec. 22 (Bloomberg) -- Sales of existing U.S. homes in November rose to the highest level in almost three years as first-time buyers rushed to take advantage of a government tax credit and lower prices.

Purchases increased 7.4 percent to a 6.54 million annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. Another report showed the economy grew a less-than-forecast 2.2 percent in the third quarter as companies cut stockpiles, pointing to manufacturing gains at the start of 2010.

The housing market is getting a boost from efforts by the government and Federal Reserve to stabilize the industry at the center of the worst recession since the 1930s. Improved consumer spending combined with record decreases in inventories will promote production, which may keep the world’s largest economy growing into 2010.

The economy is “rebounding again pretty much across the board,” said Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc. in New York. “We will see somewhat stronger growth,” he said, adding “it’s not going to be one of these dramatic recoveries.”

Stocks rose and Treasury securities fell after the reports. The Standard & Poor’s 500 Index added 0.4 percent to 1,118.79 at 1:28 p.m. in New York, and the S&P Homebuilder Supercomposite Index was up 3.8 percent. The yield on the 10-year Treasury note rose to 3.74 percent from 3.68 percent late yesterday.

Slower Expansion

The economy grew at a 2.2 percent annual rate in the third quarter, down from a prior estimate of 2.8 percent, revised figures from the Commerce Department showed today. Companies curbed spending and cut inventories at an even faster pace, leading to a slower pace of expansion.

Existing home sales were projected to rise to a 6.25 million annual rate, according to the median forecast of 69 economists in a Bloomberg News survey. Estimates ranged from 5.2 million to 6.5 million. The NAR revised October’s reading down to a 6.09 million pace from an initially reported 6.1 million rate.

First-time buyers accounted for 51 percent of sales last month, and 71 percent of the houses sold cost less than $250,000, the report from the real-estate agents’ group showed. The figures indicate the government’s tax credit helped boost demand.

Mortgage Rates

Fed debt purchases are helping keep mortgage rates close to record lows, while President Barack Obama’s Nov. 7 extension and expansion of the tax credit through April may provide short-term impetus to sales and construction.

The central bank last week signaled it would keep lending rates low for “an extended period” to foster growth. The average rate on a 30-year fixed mortgage was 4.94 percent last week and has averaged 4.85 percent since the end of October, according to Freddie Mac.

“Housing is on a solid footing through to the spring markets,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto, who forecast a rise to 6.5 million units. “But once foreclosed, unlisted homes go back on the market and homebuyers’ incentives come off, we’re looking at a weaker back half of next year.”

Purchases of existing homes rose 44 percent in November compared with a year earlier, the biggest increase on record. The median price was $172,600, down 4.3 percent from November 2008. The figure is influenced by the mix of sales and the drop reflects the growing proportion of lower-priced houses.

Home Prices

A report from the Federal Housing Finance Agency in Washington showed home prices fell 1.9 percent in October from a year earlier. The group’s U.S. housing index is down 10.8 percent from the April 2007 peak.

The number of previously owned unsold homes on the market fell 1.3 percent to 3.52 million. At the current sales pace, it would take 6.5 months to sell those houses compared with 7 months at the end of October. The ratio is the lowest since December 2006.

The share of homes sold as foreclosures or otherwise distressed properties was 33 percent, said Lawrence Yun, the agents group’s chief economist.

“The tax credit had the intended impact of drawing buyers in and lowering inventory,” Yun said in a news conference. “An estimated 2 million buyers have taken advantage of the credit.”

Single-Family Sales

The report showed sales of existing single-family homes rose 8.5 percent to an annual rate of 5.77 million. Sales of condos and co-ops were unchanged at a 770,000 rate.

Toll Brothers Inc., the largest U.S. luxury-home builder, projected deliveries may fall by as much as 33 percent in the 12 months through October 2010, and the average selling price may drop as low as $540,000.

“We believe it may take some time for Americans to regain confidence in our economy, their job status and the benefits of home ownership,” Robert Toll, chief executive officer at Toll Brothers, said in a Dec. 3 statement. “We anticipate a gradual recovery in housing, similar to the one that occurred in the early 1990s.”

Source: Bob Willis - Bloomberg News

Monday, December 21, 2009

Good article on tax saving tips for all of the self employed among us =>Taxes 2009: Get it together now

WASHINGTON – Dec. 11, 2009 – For millions of Americans, “consultant” or “freelancer” is a euphemism for “unemployed.”

But whether you’re self-employed by choice or circumstances, there’s a lot you can do between now and year’s end to reduce your 2009 tax bill. One of the advantages of self-employment is that you have more control over your tax destiny than folks who have their taxes withheld from their paychecks. Some examples of tax-saving steps you can take before the end of the year:

Purchase needed materials. When you’re self-employed, everything you buy for your business, from manila envelopes to a new computer, is deductible. By making those purchases now, you can deduct the expense on your 2009 tax return instead of waiting until next year, says Mary Canning, dean of the school of taxation and accounting at Golden Gate University in San Francisco.

“If you’re thinking your laptop isn’t functioning very well or you need a new scanner, this might be the time to do that kind of purchase,” Canning says.

A purchase made with a credit card counts as a 2009 expense, even if you don’t pay the bill until 2010, Canning says.

Make sure you keep receipts and other records for these purchases, says Justin Ransome, partner in Grant Thornton’s National Tax Office. If you’re audited, the IRS will ask you to prove that these were legitimate business expenses, he says.

Delay income. If you’re employed, your company probably won’t agree to hold on to your last paycheck until Jan. 1 (although this sometimes works if you’re due a bonus or commission). But if you’re working for yourself, your clients may be happy to wait until next year to pay you for recent services.

Use health insurance tax breaks. Most workers who are covered by their employer’s health insurance can’t deduct their portion of the premium. Out-of-pocket expenses aren’t deductible unless they exceed 7.5 percent of adjusted gross income.

For the self-employed, though, 100 percent of health insurance premiums are deductible, says Mark Luscombe, tax analyst for tax publisher CCH. You can also deduct the cost of providing health insurance for your spouse and your dependents. However, the deduction can’t exceed the net income of your business.

If you purchased an individual insurance policy, you may be eligible to contribute to a health savings account. Contributions to a health savings account can be used to pay for deductibles and other costs that aren’t reimbursed by your insurance plan.

Unlike the flexible spending accounts offered by many employers, money remaining in HSAs at year’s end can be rolled over to future years. Self-employed workers can deduct contributions to an HSA, and withdrawals are tax-free as long as the money is used for qualified health care expenses, says Eddie Gershman, a partner with Deloitte Tax.

To qualify for an HSA, you must have a high-deductible insurance policy, which the government defines as one with a minimum deductible of $1,150 for an individual or $2,300 for a family.

The maximum you can contribute is $3,000 for an individual or $5,950 for family coverage.

Save for retirement. For the newly self-employed, saving for retirement may seem like an unaffordable luxury. But squirreling away even a small amount can reduce your 2009 tax bill.

There are several retirement-savings plans available to the self-employed, but the SEP-IRA is the easiest to set up, Gershman says. Contributions are deductible, and you can contribute up to 25 percent of your earned income, up to a maximum of $49,000 in 2009.

You have until the due date of your 2009 tax return to set up and fund a SEP-IRA, so you can wait until April 15, or even longer if you file for an extension. But the sooner you start saving, the sooner you’ll start earning money.

Start planning now. Finally, this is a good time to review your records and start planning for 2010, says Gale Northrop, a financial consultant for Schwab. If taxes aren’t withheld from your paychecks, you’re supposed to pay estimated taxes every quarter.

Tax tips for everybody else

While taxpayers who work for an employer have fewer options, there are year-end steps they can also take:

Give to charity. Donations are deductible as long as the charity or non-profit is qualified to receive deduction contributions (IRS Publication 78 includes a list of qualified organizations, but doesn’t include many religious groups that are also eligible.)

Timing is important if you want to claim the deduction on your 2009 tax return. Contributions made by check are considered delivered on the day they’re mailed, according to Grant Thornton. Contributions paid with a credit card are deductible in the year the charge occurs, even if you don’t pay the bill until next year. In general, pledges – no matter how heartfelt – aren’t deductible until you make the payment.

Buy a car. OK, you probably shouldn’t buy a car just to get a tax break. But if you’re in the market for a new vehicle anyway, buying one before year’s end could lower your taxes. You can deduct sales and excise taxes on new vehicle purchases of up to $49,500. You can claim this deduction even if you don’t itemize.

Harvest investment losses. Last year’s market meltdown and the economic downturn incinerated a lot of companies. If some of the securities in your portfolio are smoldering, you may be eager to ditch them and claim a loss for worthless securities. But if the stock continues to trade – even if it trades only infrequently in informal markets such as the Pink Sheets – it’s not considered worthless. In addition, the IRS requires you to claim the loss in the year the security becomes worthless, which is often difficult to figure out until well after the fact.

There are, however, other ways to claim a loss on securities that you believe are beyond redemption, says James Van Grevenhof, tax analyst for Thomson Reuters. One is to sell the security to an unrelated third party, which could include your broker, a cousin or a friend (you can’t sell it to a parent, child or sibling). You can claim the difference between the amount you paid and the proceeds from the sale as a loss on your tax return.

If no one is willing to buy your securities, you can abandon the stock, Van Grevenhof says. You must permanently relinquish all rights to the security, he says. You can accomplish this by contacting your broker or the company that issues the security.

Capital losses can be used to offset capital gains from the sale of securities.

If you had no capital gains this year, you can deduct up to $3,000 of your losses against ordinary income. Losses that exceed that amount can be carried over to future years.

Copyright © 2009 USA Today

Friday, December 11, 2009

The Greatest Christmas Decoration Ever!!!!

"Good news is that I truly out did myself this year with my Christmas decorations. The bad news is that I had to take him down after 2 days. I had more people come screaming up to my house than ever.Great stories. But two things made me take it down.

First, the cops advised me that it would cause traffic accidents as they almost wrecked when they drove by.

Second, a 55 year old lady grabbed the 75 pound ladder almost killed herself putting it against my house and didn't realize it was fake until she climbed to the top (she was not happy). By the way, she was one of many people who attempted to do that. My yard couldn't take it either. I have more than a few tire tracks where people literally drove up my yard."

Happy Holidays!!

Tuesday, November 24, 2009

Home Prices in 20 U.S. Cities Rise for Fourth Month

Nov. 24 (Bloomberg) -- Home prices in 20 U.S. cities rose for a fourth straight month in September, pointing to improvement in real estate that’s helping the economy emerge from recession.

The S&P/Case-Shiller home-price index increased 0.27 percent from the prior month on a seasonally adjusted basis, after a 1.13 percent rise in August, the group said today in New York. The gaugefell 9.36 percent from September 2008, more than forecast, yet the smallest year-over-year decline since the end of 2007.

Rising home sales, aided by government programs and a decline in mortgage rates this year, have helped stem the slump in property values that precipitated the worst recession since the 1930s. Home buying and consumer spending may still be hampered by higher unemployment, which may prompt more foreclosures.

“The reduction of inventories we have seen has helped stabilize prices,” saidMichael Gregory, a senior economist at BMO Capital Markets in Toronto. “The reason you have to be a little more nervous or cautious is because some of the demand we’re seeing for homes was from a push to get the transactions to close in anticipation of the tax credit expiring.”

Stocks declined as a separate report on third-quarter gross domestic product from the Commerce Department showed consumer spending during the three months was weaker than first estimated. The Standard & Poor’s 500 Indexfell 0.2 percent to 1,103.70 at 10:44 a.m. in New York.

Economists’ Forecasts

Economists forecast the 20-city home-price index would decline 9.1 percent from September 2008, after a previously reported 11.32 percent drop in the 12 months ended in August, according to the median forecast of 30 economists in a Bloomberg News survey. Estimates ranged from decreases of 8.3 percent to 10.3 percent. Year-over-year records began in 2001.

The Federal Housing Finance Agency reported today that its purchase-only home price index was unchanged in September after a 0.5 percent drop in August. In the third quarter, home prices rose 0.2 percent from the previous three months, the agency’s figures showed.

The U.S. economy grew at a 2.8 percent annual rate in the third quarter, less than the government reported last month, reflecting a smaller gain inconsumer spending and a bigger trade deficit. Americans’ spending, which accounts for about 70 percent of the economy, rose at a 2.9 percent rate, compared with a previously reported 3.4 percent pace.

Corporate Profits

Corporate profits climbed by the most in five years, the Commerce Department in Washington also reported.

Nineteen of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline in home prices than in August.

Compared with the prior month, nine of the 20 areas covered showed an increase while 10 had a decline. The biggest month-to- month gains were in Detroit and Minneapolis, where prices increased 1.8 percent.

Existing home sales in October rose to the highest level in more than two years, National Association of Realtors data showed yesterday. The median sales price decreased 7.1 percent from a year earlier, the smallest decline in more than a year.

Housing has been among the industries leading to stabilization in the U.S. economy. To ensure the recovery in housing continues, President Barack Obama and Congress this month extended a tax credit of as much as $8,000 for first-time homebuyers until April 30, from Nov. 30. They also expanded it to include some current owners.

Purchase Applications

Concern about the looming expiration of the credit earlier this month weighed on builder sentiment and may have been the reason the Mortgage Bankers Association’s purchase applications index fell to a 12-year low in the week ended Nov. 13. The bankers group is scheduled to release last week’s applications report tomorrow.

While the erosion of house prices is starting to end, it will take “a considerable amount of time” for the housing market to recover fully, Federal Reserve Bank of Cleveland President Sandra Pianalto said in a speech Nov. 17.

“Though we have seen some signs that the worst may be over, the housing industry is not out of the woods yet,” Pianalto said at a housing conference sponsored by the Ohio Housing Finance Agency and Ohio Capital Corporation for Housing. “Nor is the broader economy.”

More Foreclosures

Two risks to stabilization in housing are rising unemployment and foreclosures. Foreclosures on prime mortgages and home loans insured by the Federal Housing Administration rose to 30-year highs in the third quarter, the Mortgage Bankers Association said Nov. 19.

Almost 23 percent of U.S. homeowners in the third quarter owed more on their mortgages than their properties are worth, according to First American Core Logic, a real-estate information company based in Santa Ana, California.

The unemployment rate rose to a 26-year high of 10.2 percent in October, according to the Labor Department. More joblessness may lead to more mortgage defaults, bringing more foreclosed properties onto the market and pushing down prices. Higher unemployment will also limit demand.

D.R. Horton Inc., the second-largest U.S. homebuilder, on Nov. 20 reported a fourth-quarter loss that exceeded analysts’ forecasts and said the housing outlook remains difficult.

“The thing that drives our business the most is job creation,” Chief Executive Officer Donald Tomnitz said on an earnings call for analysts. “If we look at the macroeconomic environment, it’s not good for us.”

Karl Case, an economist professor at Wellesley College, and Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, created the home-price index based on research from the 1980s.

Source: Bloomberg.net by Courtney Schlisserman

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Thursday, November 5, 2009


Dodd: A “Double Victory” for Connecticut Workers and Middle Class Families

WASHINGTON, DC – Senator Chris Dodd's legislation to extend the homebuyer’s tax credit and expand it to more middle class families passed the Senate tonight as part of a bill that will also extend unemployment insurance. Dodd was an original co-sponsor of the bill, which will provide 14 additional weeks of jobless benefits for Connecticut workers.

“This is a double victory for families in Connecticut,” said Dodd. “Extending unemployment insurance benefits will help Connecticut families make ends meet in a tough economy. And thousands more middle class Connecticut residents may now be eligible to take advantage of the successful homebuyer’s tax credit. By helping unemployed workers keep from falling further behind, and helping middle class families get ahead, we’re taking positive steps to get our economy back on track.”

Dodd was joined by Senator Johnny Isakson (R-GA) in support of extending the homebuyer’s tax credit. The provision also expands it to cover people looking to buy a new home after having owned and lived in a home for more than five years. More than 70 percent of existing homeowners will now be eligible to take advantage of this program and use the credit to buy a new home.

The House version of the bill provided a 13-week extension in unemployment benefits for workers in states where the three-month unemployment average was above 8.5 percent. Dodd co-authored the Senate version, which provides a 14-week extension for workers in all states, including Connecticut, and an additional six weeks for workers in states where the three-month unemployment average is at or above 8.5 percent. Connecticut's three-month average is 8.1 percent.

Summary of Dodd’s Homebuyer’s Tax Credit Provision:

· Extends the $8,000 first time Homebuyers Tax Credit and creates a new $6,500 tax credit for qualifying “move-up buyers” purchasing a home before April 30, 2010.

· Qualifying “move-up” buyers include homebuyers who already own a home that they have used as a principal residence for 5 years or more.

· Homebuyers with binding contracts as of April 30th will also qualify for the credit so long as they complete the transaction within 60 days.

· Available to homebuyers with incomes of up to $125,000 for a single return or $225,000 for a joint return.

· Available for homes which cost less than $800,000.

· Provides authority to the IRS to do greater oversight while processing the return and requires that the taxpayer claiming the credit be 18 or older.

· Members of the military, military intelligence, and foreign service who are on qualified extended official duty are not subject to the recapture fee and individuals who have been deployed overseas for 90 days or more in 2008 or 2009 can claim the credit through April 30, 2011.

Source: Charles A Ferraro, President – William Raveis Mortgage LLC

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Wednesday, November 4, 2009

Fed Sees No Need to Raise Rates Soon

WASHINGTON — The Federal Reserve signaled on Wednesday that it was not close to raising interest rates, saying the economy remained weak even though the recession appeared to be over.

In a statement after a two-day policy meeting, the central bank said it would keep its benchmark interest rate at virtually zero, repeating its long-standing mantra that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.”

For practical purposes, analysts said, that means policy makers are still at least six months away from tightening monetary policy.

It was unclear whether Fed policymakers even discussed modifying their language on interest rates, which would be a first step toward a shift in policy. Some officials have worried that even discussing a change in language, which would be disclosed when minutes of the meeting are published two weeks from now, would send the premature signal that higher rates were imminent.

“Economic activity has continued to pick up,” the central bank said, barely acknowledging the jump in economic growth that the government reported last week. As it had said after its meeting in September, the central bank said consumer spending remained constrained by continuing job losses, sluggish growth, reduced wealth and tight credit.

Predicting that economic growth will “remain weak for a time,” the Federal Reserve said that inflation would remain “subdued.”

Over all, the Fed’s statement was on the dour side, no more upbeat than the one it issued after its policy meeting in late September.

The government estimated last week that the United States economy grew at an annual pace of 3.5 percent in the third quarter, its first quarterly expansion in a year.

But the Fed chairman, Ben S. Bernanke, has repeatedly warned that the recovery is fragile, that growth will be sluggish and that unemployment will remain very high, above 9 percent, until some time in 2011.

Within the central banks, officials have begun debating when they should start signaling an eventual shift toward tighter policy. Though a few of the Fed’s more hawkish policy makers have rumbled in public about the need to head off future inflation, Mr. Bernanke and other officials have made it clear that it was still too early to hint about changes.

“The one consistent theme with all the Fed speakers is that they’re not going to raise rates any time soon,” said Drew Matus, an economist at Bank of America-Merrill Lynch. “That is the one consistent theme that gets hammered home time and again.”

Fed officials face competing challenges as they try to get monetary policy back to normal over the next several years, and they need to make a judgment about timing. Tightening too early could send the economy back into a downturn, as happened during the late 1930s; waiting too long would set the stage for inflation.

In their statement on Wednesday, Fed officials made it clear they still saw little risk of higher inflation, noting that “substantial resource slack” — a euphemism for high unemployment and unused factory capacity — would keep inflation, and expectations of inflation, “subdued.”

The Fed’s preferred measure of inflation, which excludes prices of food and energy, has climbed by less than 1.5 percent over the past year — well within Mr. Bernanke’s unofficial comfort range of 1 to 2 percent.

The overnight Federal funds rate, the interest rate that banks charge for lending their reserves to each other, has been held between zero and 0.25 percent since last December.

In addition, the Fed has tried to pump up financial markets and the economy by more than doubling the size of its balance sheet — creating more than $1 trillion in new money out of thin air for its emergency credit programs — and to drive down long-term interest rates by purchasing Treasury bonds and mortgage-backed securities.

Fed officials have already cut back some of their emergency loan programs and stopped buying Treasury bonds, and they have said they will stop buying mortgage securities by next March.

To tighten monetary policy, Fed officials will have to both raise interest rates and start reducing the size of its balance sheet by selling all the securities it has acquired.

Source: By EDMUND L. ANDREWS - NYTimes

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Wednesday, October 21, 2009

Forclosures Are More Profitable Thank Loan Modifications, According To New Report

Mortgage companies are more likely to foreclose on homeowners than modify their loans because they make more money off foreclosures, argues a new report by a consumer advocacy group.

While homeowners, lenders and investors typically lose money on a foreclosure, mortgage servicers do not, says report author Diane E. Thompson, of counsel at the National Consumer Law Center. Servicers are the companies that manage the mortgages and collect payments.

"Servicers may even make money on a foreclosure," she writes. "And, usually, a loan modification will cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified and no penalty, but potential profit, if the home is foreclosed."

Thompson attributes this to a system of perverse incentives created by lawmakers and rulemakers in the market, like credit rating agencies and bond issuers. The private rulemakers typically dictate how a servicer can account for potential losses and profits. They hold enormous sway over securitized mortgages, which are owned by investors. More than two-thirds of mortgages issued since 2005 have been securitized, notes the report, using data from the industry publication Inside Mortgage Finance.

In those cases, the servicer is empowered to handle virtually all aspects of the mortgage, from collecting the monthly payments to initiating foreclosure proceedings. While they're obligated to do what's best for the ultimate owners of the mortgage -- the investors -- servicers have some latitude in deciding what course of action to pursue, be it a foreclosure or loan modification.

When a homeowner is delinquent on a mortgage that's been securitized, the servicer must front the late payment to the investors. When a home is foreclosed, the servicer is typically first in line to recoup losses. But if a mortgage is modified, the servicer typically loses money that isn't necessarily recoverable.

"Servicers lose no money from foreclosures because they recover all of their expenses when a loan is foreclosed, before any of the investors get paid. The rules for recovery of expenses in a modification are much less clear and somewhat less generous," she said.

That's part of the reason why the Obama administration created a $75 billion program to limit foreclosures. The money is to be distributed to servicers who successfully modify home loans, with the hope that the incentives to modify outweigh the incentives to foreclose.

Thompson's report outlines eight specific steps to reverse this trend. They include mandating that servicers attempt to modify a loan before initiating foreclosure proceedings and reforming bankruptcy laws so judges can modify distressed mortgages.

Source: The Huffington Post


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Tuesday, October 20, 2009

Are You Qualified for a Mortgage Modification, or Is Refinancing Your Best Route?

The Government loan modification progress reports inspire institutions to take the foreclosure prevention program more seriously. Find out if you are one of the many that qualifies for a mortgage modification, or if refinancing is a better option.

The Home Affordable Modification Program was launched in March 2009 to help qualified home owners receive a lower monthly payment and avoid foreclosure. The United States Treasury Department recently reported only 9 percent of home owners eligible for the government's $75 billion loan modification program have been offered help. This equates to just 235,247 loans that were at least two months delinquent.

The government hopes to help up to 4 to 5 million financially distressed home owners modify their mortgages and has promised to reach 500,000 home owners by November 1st. In order to fast track these goals, the government has cracked down on the institutions participating in this program and will be supplying the public with monthly progress reports and will be performing random audits to see if borrowers are being improperly rejected.

Now that the government has drawn attention to these institutions, expect to see a greater number of loan modification applications being reviewed and accepted. If you are one of the many home owners who find it difficult to make monthly mortgage payments or you know someone who needs help, then read on and find out if you are a viable candidate for a mortgage modification, or if refinancing is your best option:

Primary Residence

Is the home you are trying to get a mortgage modification for your primary residence? If not, you may not be eligible for a mortgage modification, since a home must be “owner occupied”. If your home is occupied by tenants, vacant or condemned, you may want to contact Traditional Mortgage at 203-881-5572 to determine whether or not you qualify to refinance your current mortgage at a lower rate.

Monthly Mortgage Payments
Are you behind or in danger of falling behind on your mortgage payments? If you are experiencing a great deal of hardship due to a change in your circumstances (i.e. rising mortgage payment or an increased expense such as emergency medical care) and foresee defaulting on your current monthly mortgage payments, contact a Traditional Mortgage mortgage professional today to see if your current financial situation qualifies you for a mortgage modification. If not, refinancing your current loan may be another viable option to avoid foreclosure.

Mortgage Signing Date
Did you get your current mortgage on or after January 1st, 2009? If your answer is yes, then don't count on being considered for a mortgage modification. Instead contact us directly at 203-881-5572 to determine alternate options.

Loan Balance
Is your loan balance less than $729,750? The mortgage modification program is only available to those who owe less than $729,750. If you owe quite a bit on your home, you'll want to speak to your Traditional Mortgage mortgage professional to learn whether or not you are eligible for a mortgage refinance. A refinance could potentially reduce your monthly mortgage payments and save a great deal of money over the life of your loan.

A few other items that may rule out a mortgage modification include both your savings account and employment status. Those home owners with a significant amount of savings in the bank are likely to be turned down for a mortgage modification as they have what may be considered sufficient funds put aside for emergencies and are not shown to be experiencing a financial hardship. In this case, refinancing may serve as a solution and help by decreasing future monthly payments.

On the other hand, those home owners who are jobless and have depleted savings and checking accounts are also unlikely to receive a mortgage modification as the program requires that applicants show proof of current income and that the income is likely to continue for at least nine months. Whatever the case, it is always a good idea to work closely with your Traditional Mortgage mortgage specialist when researching the best options for your specific situation.

Source: William Lund - Traditional Mortgage

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Monday, October 19, 2009

Apartment sales soar 31% in Queens, 29% in Bklyn

After seven consecutive quarterly declines, apartment sales in Brooklyn and Queens picked up in the third quarter, according to a new industry report.

Apartment sales in Brooklyn and Queens picked up in the third quarter, despite a rise in unemployment and the ongoing credit crisis, according to the latest industry report released Thursday.

Mirroring results reported last week in Manhattan, apartment sales in both boroughs rose from the previous quarter. In Brooklyn, the number of sales surged 29.4% in the third quarter from the previous quarter. In Queens, they did even better, soaring 31%. The sharp upticks are the result of pent up demand and an increase in confidence, noted Jonathan Miller, chief executive of Miller Samuel.

“People on the fence made a decision to buy,” said Mr. Miller (from Miller Samuel Inc., appraisal firm). “I think one primary catalyst is that the stock market went up (so strongly) in the third quarter.”

Despite the recent rise, the report underscored that activity remained well below the depressed levels of the third quarter of 2008. Sales in Brooklyn were down 19.6% to 1,847 from the same time last year, and were down 13.9% to 2,789 in Queens.

“Because the first two quarters of the year saw such a dearth in activity any modest uptick end up being good news,” said Mr. Miller. “That does not suggest we have reached the bottom.”

The increased activity in the third quarter had a positive impact in Brooklyn on median sales prices, which increased 7.9% to $476,000 from the second quarter, while median sales prices in Queens were unchanged at $362,000. In Brooklyn, the rise in median sales price in the third quarter is the first increase recorded after seven consecutive quarters of declines.

The report recorded some signs that the market may be approaching the bottom in the two boroughs. Inventory is down sharply from a year ago—in Brooklyn, inventory is down 21.2% to 5,600 units and in Queens it is down 13.9% to 9,797 units.

By Amanda Fung, Crain's New York Business


Frequently Asked Questions
In 2008, Congress enacted a $7500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechanism to decrease the over-supply of homes for sale.

For 2009, Congress has increased the credit to $8000 and made several additional improvements. This revised $8000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009.

Tax Credits – The Basics

1. What’s this new homebuyer tax incentive for 2009?

The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?

Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?

Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 – $8000 = $1500)

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?

This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 – $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. How does withholding affect my tax credit and my refund?

A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

6. Is there an income restriction?

Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. How is my “income” determined?

For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

8. What if I worked abroad for part of the year?

Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

Not always. The credit phases-out between $75,000 – $95,000 for singles and $150,000 – $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).

For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown:

Couple’s income $165,000

Income limit 150,000

Excess income $15,000

The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute).

In this example, the disallowed portion of the credit is 75% of $8000, or $6000

($15,000/$20,000 = 75% x $8000 = $6000)

Stated another way, only 25% of the credit amount would be allowed.

In this example, the allowable credit would be $2000 (25% x $8000 = $2000)

10. What’s the definition of “principal residence?”

Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

11. Are there restrictions on the location of the property?

Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.

12. Are there restrictions related to the financing for the mortgage on the property?

In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

13. Do I have to repay the 2009 tax credit?

NO. There is no repayment for 2009 tax credits.

14. Do 2008 purchasers still have to repay their tax credit?

YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

Some Practical Questions

15. How do I apply for the credit?

There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

16. So I can’t use the credit amount as part of my downpayment?

No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

17. So there’s no way to get any cash flow benefits before I file my tax return?

Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

Some “Real World” Examples

18. What if I purchase later this year but can’t get to settlement before December 1?

The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

19. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?

You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options.

· If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.

· They can extend their 2008 income-tax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension.)

· If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov)

Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

20. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?

No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

21. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?

No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

22. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well?

No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

23. I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit?

No; double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.

24. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?

One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. (See below, #24). Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?

The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

26. I have a home under construction. Am I eligible for the credit?

Yes, so long as you actually occupy the home before December 1, 2009.


Note: The impact of estimated tax payments would be the same.

Situation 1: Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit.

Result: Sally’s withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000.

Situation 2: Nick and Nora file a joint return. Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit.

Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 – $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax credit = $9200)

Situation 3: Cesar and LuzMaria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 – $5000). They also qualify for the $8000 first-time homebuyer tax credit.

Result: Cesar and LuzMaria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 – $2200 = $5800). If they owed penalties and/or interest, that amount would reduce the refund.

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Source: William Raveis Real Estate & Mortgage Services