February, 2009

The tradition of being able to deduct the mortgage interest from your income — and cut your taxes — is one of the primary benefits of homeownership.

Now that deduction is in trouble.

The Obama budget proposes putting some income requirements on this practice.  Any family, making more than $250,000 a year, may no longer be able to deduct mortgage interest should this proposal go through.

The administration says it needs this cut in order to pay for other spending programs;  they believe that cutting back on this deduction is the best way to come up with the extra revenue.  We’ll keep tracking this story as it develops.

In other news from the latest housing report*:

• Existing home sales dropped in January by nearly 9% compared to the month and the year before.  Buyers are apparently waiting for more news from the economic stimulus package before jumping into the housing market.
• Prices are also down by nearly 15% in the past year.   The recession marches on.
• But the good news?  Housing inventory is down:  The total number of homes for sale has dropped to a two-year low;  that’s an encouraging sign for the markets ahead. 

 *Housing Report from the National Association of Realtors^®

The paramount way to find out how much energy a prospective home saves—or wastes—is through a home energy audit. 

Professional audits can cost $200, or more.  In today’s buyers’ market, you can afford to be picky;  you may want to ask a seller for an energy audit.  As an alternative, print out a home energy audit and take it with you on a walk-through of the home;  this will help you know what questions to ask, and also what to look for.

Things to keep an eye out for, during your walk-through, could include:

• High R-value insulation the attic, floor, and the basement
• A heating and cooling unit that is less than 15 years old
• New windows and doors that are well-sealed

         Get the whole checklist here.

In both a foreclosed property, and one offered for short sale, the homeowners have not been able to keep up with their regular mortgage payments.  In a foreclosure, the bank has taken ownership of the property and the family has left.  In a short sale, the family has worked out an agreement with the lender to sell their home for less than they owed on their mortgage—a way to avoid foreclosure.

Which is right for you?  A foreclosure is often a lower price, but because the home has been empty for longer, it will require a buyer who’s able and willing to make more home improvements.  A short sale probably won’t be adorned with fresh paint and the latest upgrades, but is more likely be in better condition.  

If buying a distressed property is right for you, look for a REALTOR^®; to help you find properties flagged as ‘foreclosure’ or ‘short sale.’  You will want to ensure you have an experienced agent for the entire process—a distressed property sale involves a lot more paperwork.

Listen in to this week’s show for more about buying distressed homes.

In the West, the news is not good.  The recession continues to reduce home prices.  Prices fell a staggering 25% over last year, yielding a median home price of $220,000.   The cause of this drop in price appears to be the high number of distressed properties for sale.  Buyers are looking for big price drops, and finding them.  This has helped the rate of sales in this region to go up sharply:  close to a 30% increase from a year ago. 

The Midwest is doing better than any other part of the country in home prices. The median price is just over $138,000—a 7%  drop over last year, but comparatively, not a large decrease compared to the rest of the country.  Because of this, the deals are not as plentiful, so buyers aren’t as active;  existing home sales are down in the Midwest.

In the Northeast, sales and prices are both down.  The median home price is just over $228,000 — a nearly 15% drop from last year.  Buyers aren’t as active, either;  existing home sales are down a total of 24%.

Finally, in the South, another modest drop in home prices.  Like the Midwest, the prices fell by just over 7%, although the median price is still higher at about $152,000.  There’s less buying in this region, and existing sales are down by nearly 16%.

Unfortunately, the recession keeps hitting hard.