California Eliminates State Tax on Forgiven Debt For Primary Homes
As reported by CAR, distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure or loan modification. Enacted into law yesterday, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief income with federal law. For debt forgiven on a loan secured by a “qualified principal residence”, borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new CA exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.
“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, construction or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to pay off a previous loan that would have qualified.
The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be except under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.
For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill’s 401 is available online.
Thinking of Buying In Truckee – Tahoe? Mortgage Rates at New Lows, Thanks To Our European Friends
Each month since the end of last year we have heard nothing but good news for the struggling U.S. housing market. What economic event aided to retain our low mortgage interest rates this time you ask? Well all the accolades go to the European debt crisis, specifically Greece, Spain and Portugal. But hey let’s not single them out. With the easy entry policy into the European Union and Euro Dollar other countries may just follow suit. So what does this mean to you, the U.S. home consumer – mortgage rates are at historic lows.
The current average rate for a 30 year fixed loan is 4.87%, according to Bankrate.com. That’s the lowest rate for a 30 year loan since Bankrate started keeping track 25 years ago. One could not find a better time in our generation to buy or refinance a home especially with home prices rolled back to the beginning of the millennium.
So how did the European crisis directly impact how we got to these low rates? Unsteady investors are concerned about their investment so they moved heavily into to the safety of U.S. Treasury’s. That in turn forced down the yield and influences a variety of consumer interest rates, especially mortgages. The decline is also good news for homeowners looking to refinance, particularly those who owe more on their mortgage than their house is worth. We have a large window of refinancing, call it even a door way sized opportunity. There is also the government’s Home Affordability Refinance Program (HARP) that provides homeowners the ability to refinance into a low rate mortgage, even with a depressed property value. This program has been extended to qualified homeowners through June 2011.
Let’s not take a good thing for granted though. These moments in market time do not last forever. Move swiftly to purchase or refinance today. How long we have you ask? The summer can easily cover your window of opportunity, but the market could stabilize in the next month to put a small increase in rates, perhaps upwards of 5.5% on 30 year fixed confirming loans by end of June. It is also a natural market response to the buying season for real estate.
Here are more reasonable reasons to the market:
- The European Union will deliver market stabilizing news with an action plan to calm the markets on a timed basis in the months to come.
- BP Oil – want some low priced crude? Grab a boat and a bucket and you can just scoop it up for free. The Feds won’t let BP get away with much more time whether BP fixes it or the government does. Either way the leak will eventually be capped.
- Existing Home Sales for April beat expectations by rising 7.6% after a pop of 7% in March. The annual rate increased to 5.77 million units, topping expectations. The median price of a home rose 4% to $173,100. It all sounds good, right? Well first of all, investors are a bit wary of the housing data. So the negative is the “inventory” increased to an 8.4 months supply. That’s the bad news. The good news is that we are at least eating into that inventory we all know exists out there. The banks are finally getting a bit smarter in handling their inventory and also directing and accepting more short sales than in recent past.
- Unemployment is another long term beast of the market that from reporting to reporting period causes momentary shifts in our mortgage rates.
- The Feds still have toe holds on the market from corporate stocks, corporate loans stimulus programs. Sooner or later Wall Street will want to see divesture. And let’s not even go to the budget…nothing like printing money.
- Hey how about another war with the North and South Korea. The countries decided to do some real saber rattling just to keep our world markets on their toes. When we see improvement expect a war or at least some serious jawing over who gets to have the bath tub rights. This is very serious as the North Koreans military went to combat alert.
Believe it or not the bright spot in all this wild news that has kindly kept our rates low is that our nation’s people are feeling better. Yes, consumer confidence is a bright. The Conference Board’s consumer confidence index rose for the third straight month, climbing to 63.3 in May from 57.7 last month.
So the market is playing out national slow recovery against the world as it turns more negative. The plan is to invest in the good news nationally or what might happen later this year in the world that affects world economic recovery or recession. That is why we have low rates today. Investors in the market are nervous about the world and they want some ROI safety until the world economic drama plays into the second half of the year.
Back in the old, pre-financial market meltdown days, mortgages used to be among those products that benefited from these kinds of flight-to-quality moves. Today’s new securities, of course, have market and interest rate risks, but are built from mortgages comprised of much better borrower stock than those of a couple of years ago. This being the case, and with risks associated with investing in mortgages at the beginning of what should be a long decline, they may be become more attractive to investors seeking to park some cash. If so, that’s good news for housing market moving forward. We’ll see.
Until then, what does this mean to you – you’re kidding right – go buy a house and enjoy the deal of a generation. Of course if you already have a home, then go refinance your property and sake a few thousand a year. That could be vacation money. Greece I heard is real cheep this year.
For further information on how you can take advantage this market opportunity regarding home financing please contact Desmond Elder at Pacific Mortgage Consultants, Inc. by e-mail e-mail or phone 530-582-4238.
Spotlight on Truckee-Tahoe Real Estate News
View past issues of our Spotlight on Truckee-Tahoe E-news filled with information about Truckee and Lake Tahoe, the communities, industry trends, featured properties and more.
Market Report: 1st Quarter 2010
Three key topics are covered in Elder Group Tahoe Real Estate’s Q1-2010 Market Report: Pricing, Short Sales and bank owned (REO) and short sale properties. Read on!
Buying in Truckee – Prices Have Reached the Bottom
Client Buyers continually ask me about inventory supplies and pricing, waiting for the “perfect” moment to buy in Truckee. My response? “It’s time.” Prices have stabilized and appear to be on the brink of a rise in certain markets segments. I recently met with a local and veteran Appraiser who spent many years leading appraisal groups for a major bank and Tahoe area lender. His sophisticated corporate algorithm programs indicate that Truckee is no longer a declining market.
Two of our Elder Group’s recent listings (mind-February and early March) went into contract in less than a week and set new highs in their respective Tahoe Donner class for the 1,300 – 1,700 and 2,250 – 2,700 square foot markets. The analytics show me the Truckee market has stabilized with signs of increasing prices. The “feel” of the market and today’s buyers demonstrate it’s changing. Low financing rates and nice product inventory gives Buyers options that align and make purchasing sense – particularly in Tahoe Donner and other resort neighborhoods such as Old Greenwood, Northstar, Lahontan and Donner Lake.
As outlined on my Market Reports, Truckee’s single family home sales over the last 26 weeks averaged $486,021. This is a 12.7% decrease from $556,604 for the prior 90 day period. New inventory has actually INCREASED in price from $541,269 and is up 10% to $595,666. The last 6 months has shown a dramatic swing in Tahoe Donner. The prior 12 week average was down $55,812 – 9.6% – over the prior 90 day period. However, new listings are UP 14.0% which equates to an increase of $80,694. This anchor market is often indicative of the health of the overall Truckee market and prices are indeed moving upward. Condo pricing has dropped a modest 8% over the prior 24 weeks with new listing climbing in price by an average of a whopping 18%!
Combining Nevada and Placer counties, under contract homes are up by 27%. Inventory is solid with nice product from which to choose and on the climb by 21.6% over the prior 24 weeks.
So, the statistics tell us the real “numbers”. The Buyers tell me the “feel” of the market. It’s indeed changing. The time to buy is truly NOW! Please contact me at Tahoe@AlisonElder.com. It’s my pleasure to find your family the Tahoe retreat you’ve been dreaming about!
Please contact Alison Elder, Elder Group Tahoe Real Estate for more information about Truckee-Tahoe real estate and market information.
Today’s Biggest Challenges – Short Sales!
The biggest challenge in today’s marketplace? Short sales. That is, the Seller owes more on the property than it is worth and requires Bank involvement. Many of these properties are on the brink of foreclosure, have Sellers who are in a deficiency judgment arena with the lender (Bank) that prefers to have their note paid in full and wants as much for the property as possible – and in many instances, more than it’s worth due to the loan amounts. It’s tough on the Sellers, really hard on the Buyers and many times the Realtors are caught in a no-win situation with unclear information, timelines and a 50%/50% chance at securing the property. Thus, if you are a Buyer considering a short sale, realize that even the best of circumstances, the road may be tenuous. Definitely have a Plan B within a certain time frame, choose a Realtor who has their Distressed Property certification and be very patient. It may – or may not – pay off, unfortunately.
REO and Short Sale Truckee- Tahoe Inventory Status –
Fewer Single Family Homes Available
As you may know, there are two types of Bank related sales. The first is REO or “bank owned property”. The second is termed a “short sale”, which means the seller owes the bank more than the property is worth in today’s market.
Here’s an overview of the Truckee-Tahoe market. Bank related property inventory reduced from December, 2009 and January, 2010. In February, single family REO home inventory decreased by 6 homes and represented <20 homes or 17% of the bank related market. Since 2/1/10, 83% (96 homes) were Short Sale situations; 59 of these homes were in Bank negotiations.
In the condo market, REO properties represented 28% of our Truckee-Tahoe bank related inventory market with 72% (38 count) with 30% in contingent status. As you can see, our market has been gently hit with these types of sales although the media has led us to believe that we will see many more in all market places. It could be a very interesting summer season!
Truckee Tahoe Real Estate Reports
Truckee SFH Inventory Trending & Pricing
Tahoe Donner Inventory Trending & Pricing
Tahoe Donner Inventory Trending & Pricing Condos
Serene Lakes Inventory Trending – Pricing 12 Months
Nevada / Placer County Sales Data
Inventory Trending Nevada & Placer Counties
NV & Placer County Homes Under Contract
It’s Springtime for Truckee Tahoe Real Estate
We hope you enjoyed last month’s issue of Spotlight as much as our team at Elder Group Tahoe Real Estate enjoyed creating it. We love keeping in regular touch with our Clients.
Now that ski season is wrapping up and the daffodils are popping up through the ground at lower elevations and the days much warmer, we naturally begin to think about spring when Tahoe transforms from a glorious snowy, mountain environment to an incredible summertime playground for all.
However, I can’t help but reflect on the winter ski season and the incredible accomplishments of our Truckee-Tahoe athletes. The representation and their stunning performances during the Vancouver Olympics were amazing and speaks to our local commitment to education, competition and athleticism. Watching our local Julia Mancuso display her Olympic Gold medal during a recent Northstar appearance, seeing Hanna Kearney win her gold in the Women’s Moguls, cheering Lindsey Vonn racing to Bronze in the Super G yet take that terrible crash, watching Bode Miller win Gold and Silver and recognizing all of our athletes who give so much to train so hard and compete so passionately is breathtaking. Congratulations to our local athletes and Team USA!
As a mom of two young children (9 ½ and 11 ½) who are both on Northstar’s Race Team, the Olympics have inspired a sense of healthy competition, the focus on both team and individual accomplishments and promoted their love of skiing. We just wrapped up the Far West J4 Super G races at Mammoth with the Olympic inspiration fresh. My son sees no limits to qualifying for the next Winter Olympics in Sochi, Russia and is planning to ski this summer anywhere he can find snow with his Northstar coach, whom he truly admires.
And to all the road warrior parents who commit to the drive up the mountain on Friday afternoons (and spend 3 – 7 hours in the car every Friday and Sunday) so they can ski as a family, get their kids on the snow in a Development or Race Team, hats off to you! The commitment you make, the early mornings at the mountain, the packing – and unpacking, is admirable. And the rewards are incredible. The life and athletic skills we teach our kids, the focused family time and friendships we create are second to none. Here’s to an incredible 2009 – 2010 ski season and buckets of pow pow for the 2010-2011 season!
Wishing you a fantastic end of ski season and early spring!
Best regards, Alison
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