Sarasota Real Estate Market News

You may owe federal income taxes in 2013 if you have a short sale, foreclosure

WASHINGTON – Jan. 9, 2012 – You may owe federal income taxes in 2013 if you have a short sale, foreclosure after this year. Now is the time to make the hard decision: Are you going to walk away from your underwater home?

Uncle Sam is still giving homeowners until Dec. 31, 2012, to go through a short sale or foreclosure without tax consequences – as long as the lender officially releases the debt.

But on Jan. 1, 2013, the rules change: The amount a lender forgives, ether in a short sale or foreclosure, on a primary residence will be taxable on federal income taxes.

So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 if they’re in the 25 percent bracket; $7,500 if in the 15 percent tax section.

Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter: The banks must officially sign off in writing before Dec. 31.

“It’s a huge issue – it will be a shock to many taxpayers after 2012,” said Mark Steber, the Florida-based chief tax officer for Jackson Hewitt Tax Service.

The law first came into affect five years ago as the housing market went bust nationwide.

The Mortgage Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the Internal Revenue Service. “Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Up to $2 million of forgiven debt can be forgiven this year, $1 million if married and filing separately, according to the IRS.

Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanovich, a board-certified tax attorney in Fort Lauderdale, Fla.

“Bankruptcy trumps everything,” he said.

Or homeowners might not have to pay income taxes on any cancellation of debt income to the extent that they are insolvent immediately before the cancellation – that is, their debts exceed the value of their assets, Jovanovich added.

Steber and Jovanovich said homeowners should decide now what they are going to do – to give themselves time.

Short sales can take a long time, said Timothy Singer of Coldwell Banker in Fort Lauderdale.

He said he knows of one that had been pending for three years.

But lenders “have been gearing up” and speeding up the process, Singer added.

But even if banks quickly approve a short sale, the would-be buyer may get cold feet and the deal fall through, Singer said.

Then the sellers have to begin again, he said.

Copyright © 2012 the Sun Sentinel (Fort Lauderdale, Fla.), Donna Gehrke-White. Distributed by McClatchy-Tribune News Service.

February 6, 2012 Posted by | News related to Sellers, News related to Short Sales and Foreclosures, News related to the Market | Leave a comment

How long will low mortgage rates last?

WASHINGTON – Jan. 4, 2012 – For nine consecutive weeks, the 30-year fixed-rate mortgage has been hovering at or below record lows of 4 percent, pushing housing affordability for homebuyers even higher.

But will these low rates stick around much longer?

The Federal Reserve has vowed to keep rates low through 2013 so rates likely will hang around for a few more months, at least, but whether mortgage rates will stay at the current record-lows, many experts say it’s unlikely.

The 30-year fixed-rate mortgage is expected to inch up to an average 4.5 percent for 2012 and increase to 5.4 percent in 2013, according to Freddie Mac economists’ forecasts.

While that forecast means rates are expected to move higher in the coming months, the rates will still be low by historical standards, economists told the Los Angeles Times. For comparison, 30-year rates averaged more than 16 percent in 1981 and 1982. What’s more, until 2000, rates typically were above 8 percent, Freddie Mac notes.

However, many homebuyers have been unable to take advantage of the low rates. Lenders’ tighter underwriting standards for loans following the housing crisis shut out some buyers who have poor credit, low downpayments or unsteady employment.

Freddie Mac had predicted that home-purchase applications would comprise two-thirds of all mortgage applications by the end of 2011. But the Mortgage Bankers Associations says that about 80 percent of the mortgage applications instead came from homeowners who wanted to refinance.

Source: “Low Mortgage Rates Likely to Continue Through 2012, Experts Say,” Los Angeles Times (Jan. 3, 2012)

February 6, 2012 Posted by | News related to Financing | Leave a comment

Retirees could again lead Fla. rebound

WASHINGTON – Jan. 4, 2012 – While international buyers have been heralded as the leaders of a Florida real estate rebound, a recent Census Bureau report on migration trends indicates that U.S. residents from northern climates are once again heading to Florida for retirement.

Between April 1, 2010, and July 1, 2011, Florida welcomed 256,000 new residents, or roughly 560 new Floridians each day. Texas grew by 529,000 residents, and California came in second with 438,000.

In total population, Florida retained its No. 4 status, but its 19.1 million residents moved closer to bumping New York, with 19.5 million residents, from its No. 3 spot.

Florida ranked No. 3 for attracting new international residents, behind only California and Texas. However, the Sunshine State ranked No. 2 in attracting residents from other U.S. states. During the 15 months of the Census study, 119,000 moved to Florida from other states, a number surpassed only by Texas’ 145,000 new residents.

The state’s growth according to the Census Bureau surpassed earlier estimates by the University of Florida’s Bureau of Economic & Business Research, and Sarasota’s Herald-Tribune dug a little deeper to find out why. They found that the UF study relies mainly on new electric utility hookups to judge population growth, while the Census Bureau relies largely on tax returns and Medicare data.

Since the Census Bureau numbers were roughly twice UF’s figures, the Medicare data may have made a difference – implying greater demand from retirees – said University of Central Florida Economist Sean Snaith. “I think with the recovery of the wealth, at least through the rebound of the stock market, that has helped the flow of retirees resume,” Snaith said.

Source: Herald-Tribune, Dec. 21, 2011, Doug Sword

© 2012 Florida Realtors®

February 6, 2012 Posted by | News related to the Market | Leave a comment

Buyers vs. sellers on home prices

WASHINGTON – Jan. 3, 2012 – Housing analysts expect home prices to stabilize in 2012, but that doesn’t mean buyers and sellers won’t continue to be at odds over home prices.

While buyers are feeling good about the housing market and saying it’s a great time to buy, seller sentiment is falling to a record low, a new report by the Mortgage Bankers Association shows. Sellers say they’re unhappy because they can’t snag the prices for the home that they want.

The MBA report finds a large sentiment gap between homebuying and home selling that isn’t expected to narrow for at least five quarters.

From 1992 to 2005, seller sentiment remained high – between 40 percent and 60 percent, according to the report. However, since 2005, seller sentiment decreased to 7.6 percent. Meanwhile, homebuyer sentiment has remained high despite unemployment and economic conditions. Nearly 80 percent of American households say now is a good time to purchase a home.

As home values dropped over the last few years, many sellers refused to budge on their prices to reflect current market traditions. One reason why: About 20 percent of homeowners nationwide are considered “underwater,” owing more on their mortgage than their home is currently worth.

Also, some sellers realize there may be a benefit in waiting to sell or keeping the home on the market to hold out for a higher price, says the author of the report, Gary Engelhardt, a Syracuse economics professor.

“This (trend) could hold prices high enough to drive a substantial wedge between the existing buyer and seller,” Engelhardt says. “And a poor jobs market with limited mobility, a key driver of housing-market transactions, may exacerbate this.”

Source: “Buyers, Sellers Continue to Butt Heads on Home Prices,” HousingWire (Dec. 29, 2011)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688

February 6, 2012 Posted by | News related to Buyers, News related to Sellers, News related to the Market | Leave a comment

Lenders start to accept short sales

WASHINGTON – Jan. 2, 2012 – Lenders are more open to short sales as a way to help struggling homeowners avoid foreclosure, according to a recent MSNBC.com article.

“Foreclosure sales are pretty devastating,” says Faith Schwartz, executive director of Hope Now, a resource for cash-strapped homeowners. “We’d much prefer a (loan) modification, but if (homeowners) don’t quality, then the next best alternative is deed-in-lieu (of foreclosure) or short sales.”

Short sales and foreclosures increased in 2010, but in 2011, short sales continued to climb (increasing 26,000 nationwide) while foreclosures dropped by 255,000, according to Hope Now data.

Some banks started to realize that a short sale is preferable to a foreclosure in most cases. For one, banks tend to make more money off of a short sale vs. foreclosure: The average price of a foreclosed home in the second quarter of 2011 was $164,217 compared to $192,129 for a short sale. Also, foreclosures tend to cost more in legal and administrative resources.

Neighborhoods also tend to benefit more from a short sale than a foreclosure because short sales tend to sell for less of a discount. And, unlike a foreclosure, short-sale homes don’t often sit vacant, which makes them prime targets for vandalism and depresses nearby property values, housing experts say.

Source: “Increase in Short Sales Give Market a Little Breathing Room,” MSNBC.com (Dec. 29. 2011)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688

February 6, 2012 Posted by | News related to Short Sales and Foreclosures | Leave a comment

Final pending sales report shows 7.3% surge

WASHINGTON – Jan. 2, 2012 – Pending home sales continued to gain in November and reached its highest level in 19 months, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 7.3 percent to 100.1 in November from an upwardly revised 93.3 in October. It’s also 5.9 percent above November 2010 when it stood at 94.5.

The index hasn’t been this high since April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the homebuyer tax credit. The data reflects contracts but not closings.

The gains might result partially from delayed transactions, according to Lawrence Yun, NAR chief economist. “Housing affordability conditions are at a record high, and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high. Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage.”

“November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,” Yun says.

Pending home sales are not affected by NAR’s recently published rebenchmarking of existing-home sales because the index uses a different methodology based directly on contract signings, and it’s adjusted for seasonality.

The PHSI in the Northeast rose 8.1 percent to 77.1 in November but is 0.3 percent below November 2010. In the Midwest, the index increased 3.3 percent to 91.6 in November and is 9.5 percent above a year ago.

Pending home sales in the South rose 4.3 percent in November to an index of 103.8 and remain 8.7 percent above November 2010. In the West, the index surged 14.9 percent to 121.2 in November and is 2.9 percent higher than a year ago.

© 2012 Florida Realtors®

February 6, 2012 Posted by | News related to the Market | Leave a comment