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!!