March, 2009

When you combine the number of people who have filed for foreclosures, and the people whose foreclosures have been completed, February produced the highest number of foreclosures since the nation’s financial downturn began.

The “Homeowner Stability and Affordability Plan” is designed to help homeowners in trouble avoid foreclosure by lowering their interest rates, mortgage payments, and, in some cases, reducing the principal they owe on their mortgage.  The cost? About $275 billion.

Some 7 to 9 million homeowners, it’s been estimated, will benefit from the plan and there’s no shortage of homeowners who are anxious to sign up.

To find out if you qualify, check out the Obama administration’s “Making Home Affordable” Web site  There, you can find links to calculators and questionnaires that will guide people towards the right next steps.

It’s a very good sign for the markets:  The jump didn’t just reflect refinancers — most of the mortgage application increases were due to buyers finally deciding to get into the market.  That’s a very good sign for sellers.

We’ll take a look at how the new flood of buyers affects the market next week.  This week, let’s examine another important, but often ignored, part of the market: Offices.

The current economic downturn, as you might expect, has hit the commercial sector just like it has hit home prices.  It’s been a brutal year for office vacancies, and it might get worse before it gets better.

There are a couple of factors in all this, but the big one is unemployment.  Massive layoffs result, naturally, in vacant offices.  But there’s also the fact that the commercial building boom of a few years back overestimated the demand.  Many projects which started years ago, during the boom, are opening now and finding no takers.

Smaller demand combined with bigger availability means overall tough times for this part of the nation’s market.

A closer look across the country:  

Out West, it’s a mixed bag:  Phoenix has the highest office vacancy rate of the country—nearly one in four offices are vacant.  Riverside, San Diego, and San Jose are also experiencing high vacancy rates.  But San Francisco has one of the lowest vacancy rates in the country, with only 10% of offices empty.  Portland, Seattle, and Honolulu are all also experiencing a good ratio right now.

In the Midwest, Detroit’s office vacancy rate is at 23%, creeping up behind Phoenix.

The East has the lowest vacancy rate in New York, where only about 8% of office spaces are vacant.  Long Island, Stamford, Boston, Pittsburgh and Washington, D.C. are all also doing well, with just under 13% of offices empty.

But the East is not impervious: In Hartford, Connecticut, vacancies are up to 19%.

Down South, Florida cities West Palm Beach, Tampa and Jacksonville are suffering, as is Dallas. 

Businesses are lucky, though, because all of these vacant offices push office rents downward.  As with any market, hard times also mean opportunity — anyone brave enough to start a business or expand one in 2009 will find ample office space choice at a great deal.  Let’s hope those businesses can lead us into a stronger economy. 

Listen to Real Estate Today on a radio station near you for live, local market breakouts.

1. Change your smoke detector batteries.  That’s easy enough, right?  You don’t even have to get your hands dirty.  Dust off the cover, change the batteries, and test the unit to make sure it is in working order.  Hopefully, you’ll never need it.

2. Repair the floors.  Wax the hardwoods, scrub the tile and linoleum, and make a list of any cracks or scratches in the surface.  You can fix small imperfections, or be ready to replace the flooring when your next renovation comes up.  Also, shampoo the carpets: rent a good-quality carpet shampooer from a local hardware store if you don’t want to spend the money on a professional carpet cleaner.

3.  Dust everything. It’s just once a year, so bite the bullet and do it right: Pull books and knick-knacks off of shelves and dust behind them, pull the couch away from the wall and sweep behind it.  Vacuum under the couch cushions, too—you can collect the change and buy yourself a drink to celebrate a hard days’ work.  Don’t forget to dust the ceiling fans.

4. Clean the refrigerator.  Have your teenage son eat everything out of it, defrost the freezer, and wipe out the shelves.  Also, clean behind the refrigerator.  Nobody does this, but if enough grime builds up it will start to blow out and over and into your kitchen.

5.  Have that garage sale.  Don’t see it like a chore—in the spirit of spring, look at the garage sale as a social event.  It’s a chance to meet your neighbors, or greet them again after hibernating inside all winter.  Put out some extra chairs, serve snacks and cool drinks, and spend a nice spring morning making a few extra dollars.

**Note: This is just a quick-start guide. For advanced advice for your specific situation, you should talk to an accountant.

Here’s a list of the possible deductions you can take advantage of when buying your new home:

Transfer and recordation taxes: When you purchase property, chances are the local, county and/or state government will charge taxes on the transaction. They don’t call it sales tax, which is beneficial. Imagine if they charged 7% sales tax on a house! These are considered “transfer and recordation taxes.” You may share these taxes with the seller, but you can deduct most, if not all, of your share of these taxes you paid during the sale.

Property taxes: You can deduct any property taxes you pay on property – even when you’re refunding pre-paid property taxes to the seller. Property taxes are fully deductible.

Interest rate points: When a high interest rate home loan is “bought down” by using points, point payments are deductible as well.

Pre-paid interest: If your mortgage company gives you a few months’ grace period before you start paying on your new mortgage, the company will still charge the interest on those months up front. That “pre-paid interest” is deductible, too.

First-time homebuyers tax credit: When buying your first home, don’t forget to utilize the new $8,000 tax credit for first-time homebuyers. It’s not a deduction, it’s a true credit: Dollar-for-dollar, the government will reduce the taxes you owe (or have already paid) by $8,000.

Add these savings up, and you’ll be pleased when April 15th rolls around!

What other deductions can I keep making, year-in and year-out, on my home?

Mortgage interest deduction: Most homeowners can deduct all the interest paid on their mortgage from their taxable income — Even with the current low interest rates, that still amounts to a large tax deduction. Make sure to check with your accountant, as there may be different rules for home equity loans.

Property taxes: Any taxes you pay to a local government for the current value of your home can be deducted from your federal return.

**Note: There is no review or editorial oversight on blogs.  Any blogs we discuss here are intended for personal insight, not professional advice.

We’re highlighting the “House in Progress” blog this week because of some hopeful news the writers offered about sales in their neighborhood…

House in Progress is run by a young family who post regular photos of improvements, advice on contractors, and doing-it-yourself, as well as design ideas, and a little bit of tea and sympathy for anyone who’s invested in a “fixer upper.”

But of course, this week’s show is all about taxes, so how does House in Progress fit in?  Well, bloggers Aaron and Jeanie bought their house originally because the taxes on their condo were too high. Their local government levied a “special assessment” on all condo owners, and the couple decided they were better off putting that money into a full house.

And that hopeful news we promised?  Check out this recent entry:

“We’re big fans of our neighborhood and that is no secret. However, with real estate depressed pretty much everywhere, we wondered how long it would take our neighbor to sell her house.

We were especially intrigued because her house was built by the same builder as ours wayyyy back in 1914. They look almost identical, save for some tweaks to the layout.  As a homeowner, you can’t help but draw up a checklist of comparisons inside your head when you hear that a neighbor’s house is for sale…

So how long did it take? A week. The house sold in a week. It closed immediately and new neighbors have already moved in. And it has sold for the highest price of any house on our little block in paradise.”

Check out HouseInProgress.net