Fiscal Cliff bill addresses some key real estate related issues

The Senate bill that finally passed the House by a 259-167 vote extended a number of federal tax code provisions that are important to homebuyers, sellers, builders and real estate professionals.
For huge numbers of financially distressed owners of homes with underwater mortgages, this was the biggest issue in the entire fiscal cliff debate. The mortgage debt relief provisions in the tax code, first enacted in 2007, expired at midnight Dec. 31.

Had Congress not acted, the tax code would have reverted to its pre-2007 treatment of mortgage principal reductions or cancellations by lenders, whether through loan modifications, short sales, deeds-in-lieu or foreclosures: All principal balances written off would be treated as ordinary income to the homeowners who received them.
For illustration, if a lender wrote off $100,000 of debt to facilitate a short sale, the seller would be taxed on that $100,000 at regular marginal rates, just as if he or she had earned it as salary.

A return to taxation of principal reductions would have disrupted short sales — a growing segment of the home real estate market — in 2013, and almost certainly would have encouraged more distressed owners to opt for foreclosure and bankruptcy.

Deduction of mortgage insurance premiums

The bill retroactively extended this benefit to cover all of 2012, plus continues it through 2013. Qualified borrowers who pay private mortgage insurance premiums or guarantee fees on conventional, low down payment home loans, FHA, VA and Rural Housing mortgages will be able to write off those premiums along with their mortgage interest on federal tax returns. The retroactive feature is crucial because Congress had allowed this deduction to lapse at the end of 2011. There are limitations, however: The write-off is available only to borrowers who have an adjusted gross income below $110,000.

You know, one day we will look back and think, “why didn’t I care more when interest rates were so insanely low?!” I bet people who purchased in the 80′s who dealt with interest rates around 15% would appreciate our 3.84%! Rates on 30-year fixed-rate mortgages averaged 3.84 percent with an average 0.8 point for the week ending May 3, down from 3.88 percent last week and 4.71 percent a year ago, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey. That’s a new low in Freddie Mac records dating to 1971, breaking the old record of 3.87 percent set during the first three weeks of February.

For 15-year fixed-rate mortgages, rates averaged 3.07 percent with an average 0.7 point, down from 3.12 percent last week and 3.89 percent a year ago. That’s also a new low in records dating to 1991, breaking the previous record of 3.11 percent set just three weeks ago.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.85 percent with an average 0.7 point, unchanged from last week but down from 3.47 percent a year ago. Rates on five-year ARMs hit an all-time low in records dating to 2005 of 2.78 percent during the week ending April 19.

For one-year Treasury-indexed ARM loans, rates averaged 2.7 percent with an average 0.6 point, down from 2.74 percent last week and 3.14 percent a year ago.

Use my mortgage calculator to see what your mortgage payment would look like with an interest rate of 3.84%!

Sure that house is manageable but are you positive you will have the time to mow all that lawn?

I’ve noticed a trend the past year with my clients. Many of them are young single people purchasing their first home. I’m so impressed by the amount of twenty-somethings that are making their first purchase without the motivation of marriage and children. Decades ago, you would never see something like that happen. My how things change. But I digress, I had a point. Oh yea, so on top of being investment saavy, these clients of mine tend to want something smaller as opposed to something bigger. I hear a lot, “this may be too much house for me.” What? Too much house? I thought everyone wanted the biggest house they could afford!? Trends have changed. Many people now are opting for smaller more manageable homes versus the sprawling mc-mansions of yesteryear.

Salt and Straw (picture from Portland Monthly Magazine)

Woohoo! So glad to see 20 new locally owned businesses open their doors this past month. A few that I’m really excited for:

Salt and Straw: Portland’s farm to cone ice cream shop, as they call themselves. I like to think of myself as a ice cream expert if you will. It’s a bit of a problem actually but that’s another story. I’m excited to head down to Salt and Straw’s new location at 838 NW 23rd Ave and try out their yummy flavors!

Hogan’s Goat Pizza: This is a family owned pizza shop that is reopening it’s doors after closing it’s Pearl district location in 2003. Their new location is 5222 NE Sacramento St. Currently it’s just for takeout but that’s usually how I get my pizza so I’m excited to give this a try.