Mortgage interest deduction – If the home is your personal residence, all of the mortgage interest you owe and paid before the end of the year is deductible on your taxes. Your mortgage lender will send you a form in January indicating the amount of interest you paid in during the year. Many lenders also make this information available online.

Property tax deductions – For your personal residence, you should be able to deduct 100% of the property taxes you’ve paid to your state and local taxing authority.

As well, there are a range of home improvements write offs (e.g., home’s energy efficiency, etc.), state, and local tax credits for buying a foreclosed home, in addition to other tax returns that you might qualify for.

Always check with your tax preparer to ensure you are receiving all your qualified deductions for your home!

Who are the people selling them on the American Dream? Their parents! It seems that parents of some adult children are strongly suggesting that their children take advantage of the low cost of homeownership available today. Some moms and dads are helping financially and are even co-signing for the mortgage. Middle age parents who have owned a home understand its true value. A home has always been a good long term financial investment. However, homeownership also has many other benefits.

In Fannie Mae’s most recent National Housing Survey, they asked the question directly: Is this a major reason to buy a home?

The study broke up the answers into financial and non-financial reasons. The top four reasons and six of the top ten reasons were NON-FINANCIAL. The top four are below:

1. It means having a good place to raise children and provide a good education.
2. You have a physical structure where you and your family feel safe.
3. It allows you to have more space for your family.
4. It gives you control over what you do with your living space (renovations & updates).

Should this surprise us? Aren’t these the same reasons our parents bought their home? Aren’t these the same reasons we purchased our home? These are the same reasons parents have suggested their children buy a home. They want the same things for their grandchildren that they believed to be important for their children.

And today, the cost of homeownership is at all time lows:

J.P. Morgan

“The numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”

MSNBC.com

“[S]omeone who plans on staying put for seven years would come out ahead by about $9,000 if they bought a median-priced home rather than being a tenant in a median-priced rental.”

HUD

“Homes today are more affordable for average families than they have been since 1971. Median-income families today have nearly double the funds needed to purchase the average home.”

Bottom Line

Now that the economy is beginning to show signs of stabilizing, people are getting back to the core values that families have always embraced. Homeownership is definitely high on that list. And today, from a financial standpoint, it may be the opportunity of a lifetime.

Courtesy of KCM Blog

These low rates can convert into big savings for today’s home buyers. Over five years ago, a home buyer would have seen around a 5% rate on a 15 year loan term. For example, on a $200,000 mortgage, that would have equated to about $1,582 a month in monthly payments. With a low interest rate today of around 3.2% on a $200,000 loan, the buyer’s monthly mortgage payment would come to around $1,400. That is a significant savings of $182 a month.  

With these lowest historical rates, now is a great time to buy that home you been waiting to buy!

Also indicated in NAR’s report was that 72% of these sales were accompanied by a traditional mortgage.

So over 12,000 homes are sold and 8,000 mortgages are issued every day. Real estate is doing much better than many say.

It is for that reason we will not be covering the projections of those groups. Instead, we want to share the beliefs of other organizations.

Washington Post:

“Housing Market and Economy Showing Encouraging Signs.”

The Wall Street Journal:

“From Bottom Up, Signs of Housing Recovery”

USA Today:

“Housing Outlook is More Upbeat”

CoreLogic:

“CoreLogic’s chief economist Mark Fleming says housing statistics and the duration of the downturn to date indicate 2012 may be the year the housing market begins to turn the corner.”

Freddie Mac:

“With the New Year comes a sense of cautious optimism. There are some positive signs in the job market and consumer confidence; housing is starting to raise hopes for continued gradual economic recovery.”

Fannie Mae:

“The housing sector will likely take incremental steps forward in 2012 …according to economists at Fannie Mae.”

Courtesy of KCM Blog

Look after your heating and cooling systems. The energy used to heat or air condition a home can account for more than half of a home’s energy bill. Have your heating and cooling systems professionally maintained each year. Consider if needed the savings by installing a new higher efficiency system. Installing a high efficiency heat pump may cut the amount of electricity used for heating and cooling by as much as 40 percent.

Look around your home for air leaks. You could save 10 percent or more on your energy bill by reducing air leaks around your home. On a windy day, cautiously run a lighter or smoke stick around windows and door joints.  If the smoke or flame moves towards or away from the source, a leak may be indicated that needs sealing.

Make use of bath, kitchen, and other ventilating systems sensibly. In only one hour, these fan systems can pull out a houseful of warm air. Turn fans off as soon as possible after use.

Close down fireplace dampers when not in use. A chimney is designed only for smoke to flow out. So close it when not in use.

Alter drapes and blinds during winter days to allow sunlight in to help naturally heat your home, and close them at night to reduce cold air infiltration. Of course during summer months, do the opposite.

Switch off any energy users not used. Although small household appliances do not use a whole lot of energy, they do add up in the end.

Additional information on home energy use and conservation tips available at the U.S. Department of Energy web site.

But while acknowledging home sales are still low, chief economist Paul Dales of Capital Economics says “it is clear that housing recovery is now well underway.”

The support is that home sales have been on the rise for the past several months, showing a 5 percent increase in December.

As well, Lawrence Yun, chief economist for the National Association of Realtors (NAR), agreed saying “The pattern of home sales in recent months demonstrates a market in recovery.”

Lawrence Yun suggests consumers are gaining confidence from “record low mortgage interest rates, job growth and bargain home prices.”

On top of the 5 percent increase in December, NAR reported a 1.7 percent annual increase in existing-home sales in 2011, for a total of 4.26 million homes.

The national housing inventory is on the decline, falling to its lowest level since March 2005, according to NAR. Roughly 2.3 million homes are currently available for sale.

“The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.

Questions about Demand

Will this be the year that the 5.9 million adults between the ages of 25 and 34 that are still living with their parents decide to purchase a home of their own?

With mortgage payments lower than rent payments in the majority of the country, will first time buyers finally decide it makes more financial sense to buy rather than rent?

Will the baby boomers take advantage of the great deals available and start purchasing vacation and retirement homes?

Will investors continue to purchase large quantities of distressed properties?

Will hedge funds negotiate a deal with the banks for bulk purchases of foreclosures?

Questions about Supply

Will 2012 be the year that builders again increase inventories of newly constructed homes?

Will baby boomers put their primary residences up for sale and relocate to their retirement destinations?

Will 2012 be the year that the shadow inventory of foreclosures finally makes its way to market?

If prices depreciate, it will force more homes into a negative equity situation. Will this create another surge in short sales and foreclosures?

Will the government put together a plan to convert large numbers of foreclosures into rental properties?

Bottom Line

With so many unanswered questions regarding both the demand for housing and supply of properties, it is very difficult to determine where prices will be at the end of the year. We suggest you contact a local real estate professional to help you determine where values are headed in your area.

Courtesy of the KCM Blog

Although these headlines seem to be saying opposite things, they are both actually correct. Each report looked at different data over different periods of time. As well, national, regional and local markets differ greatly.

In the end

Work with local real estate and mortgage professionals for the most accurate and up to date information in your area. They will help you interpret the multitudes of information available so you can understand your best options buying and selling.

If pricing does not indicate market health, then what does?  The answer is simple: it is market liquidity and not pricing that indicates the health of a housing market.  Liquidity has been defined in many ways but it basically boils down to: can an individual seller, at a time of their choosing, successfully market their property at or near market value?  We often hear of rates (turn-over and absorption) that are related to this concept.  Unfortunately, these measures are difficult to estimate and they all have something to do with outstanding inventory.  What really matters, regardless of outstanding inventory, is the likelihood that a property will close.  This is the most basic meaning of market liquidity and it can easily be proxied.  

All of the data necessary to proxy a particular market’s liquidity (and thereby its health) is available on the daily “hot sheets” of almost every MLS in country.  Since liquidity is really just a batting average all that needs to be done is total the successful transactions (closed properties) and divide these by the failed listing transactions (Expireds + Withdrawns + Cease Efforts + Cancelled)[1][2].  The resulting number is a very close approximate to the probability that any given property listed in that market will close and an increasing trend in this number indicates improving market health.

Implications

Pricing trends do not indicate the health of a housing market.  Keep in mind.  For almost every sell in an increasing market, there is a repurchase at a higher price.  For almost every sell in a decreasing market, there is a repurchase at a lower price.  Thus, pricing is a “double edged sword”.  Gains/Losses on a sell are almost always accompanied by higher/lower repurchases.  Thus, pricing trends can never indicate the health of a particular real estate market.  Instead, it is market liquidly, which can be easily proxied, that actually indicates market health.  After all, the real goal is for a seller of property to be able to transact at or near market value with a high degree of certainty.  Fortunately, most MLS’s around the country have the information at their fingertips to estimate the health of their particular market. 

It is liquidity (not price) that matters.

Courtesy of the KCM Blog