712,000 Homes in the US Regained Equity in the Past 12 Months!

CoreLogic’s latest Equity Report revealed that “over the past 12 months, 712,000 borrowers moved into positive equity.” This is great news, as the share of homeowners with negative equity (those who owe more than their home is worth), has dropped more than 20% since the peak in Q4 of 2009 (26%) to 4.9% today.

The report also revealed:

• The average homeowner gained approximately $14,900 in equity during the past year.
• Compared to Q3 2016, negative equity decreased 22% from 3.2 million homes, or 6.3% of all mortgaged properties.
• U.S. homeowners with mortgages (roughly 63% of all homeowners) have seen their equity increase by a total of $870.6 billion since Q3 2016, an increase of 11.8%, year-over-year.

The map below shows the percentage of homes by state with a mortgage and positive equity. (The states in gray have insufficient data to report.)

Significant Equity Is on The Rise

Frank Nothaft, Chief Economist at CoreLogic, believes this is great news for the “housing market.” He went on to say:

“Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

Of the 95.1% of homeowners with positive equity in the U.S., 82.9% have significant equity (defined as more than 20%). This means that more than three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home now.

The map below shows the percentage of homes by state with a mortgage and significant equity.

Bottom Line

This is exciting news! If you are one of the many homeowners who are unsure of how much equity you have in your home and are curious about your ability to move, call me today and let's meet to discuss the amount of equity in your home! 

Why Are Mortgage Interest Rates Increasing?

According to Freddie Mac's latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June, and many are wondering why there has been such a significant increase so quickly.

Why did rates go up?

Whenever there is a presidential election, there is uncertainty in the markets as to who will win. One way that this is noticeable is through the actions of investors. As we get closer to the first Tuesday of November, many investors pull their funds from the more volatile and less predictive stock market and instead, choose to invest in Treasury Bonds. When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down. Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again. Simply put, the better the economy, the higher interest rates will go. For a more detailed explanation of the many factors that contribute to whether interest rates go up or down, you can follow this link to Investopedia.

The Good News

Even though rates are closer to 4% than they have been in nearly 6 months, they are still slightly below where we started 2016, at 3.97%. The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades, as you can see in the chart below.  
Any increase in interest rate will impact your monthly housing costs when you secure a mortgage to buy your home. A recent Wall Street Journal article points out that, "While still only roughly half the average over the past 45 years, according to Freddie Mac, the quick rise has lenders worried that home loans could become more expensive far sooner than anticipated." Tom Simons, a Senior Economist at Jefferies LLC, touched on another possible outcome for higher rates:

"First-time buyers look at the monthly total, at what they can afford, so if the mortgage is eaten up by a higher interest expense then there's less left over for price, for the principal. Buyers will be shopping in a lower price bracket; thus demand could shift a bit."

Bottom Line

Interest rates are impacted by many factors, and even though they have increased recently, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven't been that high since January of 1995, according to Freddie Mac.

Buying A Home In Santa Clarita?

 

Here comes my prior to Spring blog post.  Same as it has been the past few years! If you haven't purchased a home what in the heck are you waiting for?!?!

With spring right around the corner, you may be wondering if you should wait to enter the housing market. Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.3% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.4% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.2% a year for the next 5 years. The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained below 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison projecting that rates will be up almost three-quarters of a percentage point by this time next year. An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You Are Paying a Mortgage

As a paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Bottom Line

If you are ready and willing to buy, find out if you are able to. Call me today and get started!

*When Is A Good Time To Rent??? NOT NOW!*

People often ask whether or not now is a good time to buy a home. No one ever asks when a good time to rent is. However, I want to make certain that everyone understands that today is NOT a good time to rent. The Census Bureau recently released their third quarter median rent numbers. Here is a graph showing rent increases from 1988 until today: A recent Wall Street Journal article reports that rents rose “faster last year than at any time since 2007, a boon for landlords but one that has stoked concerns about housing affordability for renters.”  The article also cited results from a recent Reis Inc report which revealed that average effective rents rose 4.6% in 2015, the biggest gain since before the recession. Over the past 15 years, rents have risen at a rate of 2.7% annually.

Where are rents headed?

Jonathan Smoke, Chief Economist at realtor.com recently warned that:

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.” 

Bottom Line

According to the WSJ article:

“In general, the higher rents go, the more difficult it will be for young people to save for down payments, making them likely to rent even longer.”

One way to protect yourself from rising rents is to lock in your housing expense by buying a home. If you are ready and willing to buy, don't hesitate to give me a call for a free confidential meeting.

Real Estate In Santa Clarita

So I took a small break from blogging the past few months as number one the market was busy and the time wasn't there for writing everyday.

But the constant question is, "How is the real estate market?"

My answer is always, as a buyer or as a seller?

Right now, if you are buying a home in Santa Clarita, there are 731 active listings! That is up about 10%. Only 305 of those listings are priced under $500,000.  As a buyer, interest rates are still low which will keep your payments lower!

As a seller, prices are up, up, up! This is great if your home ever experienced a decrease in value or if you owed more money than what it is worth that may not be true anymore! If you would like to know the value of your home, please CLICK HERE

Either way, we still have a great real estate market in the SCV! For more information on buying or selling your home please don't hesitate to contact me directly, 661-702-4767

Where Are Home Prices Headed?

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number. 

The results of their latest survey

• Home values will appreciate by 4.3% in 2015.
• The cumulative appreciation will be 19.4% by 2019.
• That means the average annual appreciation will be 3.6% over the next 5 years.
• Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 11.8% by 2019.

Individual opinions make headlines. 

April 2015 US Economic Housing Market Outlook

The April 2015 U.S. Economic & Housing Market Outlook from Freddie Mac revealed that they are optimistic about the real estate market in 2015. As a matter of fact, the sub-title of the report was “Great Expectations”. What made Freddie Mac so optimistic? Here are a few highlights from the report:

“For the remainder of the year we should see a resumption of solid economic growth and acceleration in housing activity. Notwithstanding a disappointing March jobs report the acceleration is already underway.” “With spring upon us, housing markets are poised to accelerate and we expect the best year for home sales since 2007. Despite harsh winter weather to start the year, home sales through February are only off from the 2013 pace by 7,000 sales... Pending home sales were up 3.1 percent in February to the highest level since June 2013. This marked the fourth consecutive month for rising pending home sales showing positive momentum in general for the housing market.”

Their projections…

“By the end of the spring home buying season in June, we should be well above the pace of home sales for any year since 2007.” “We are as optimistic about trends in housing markets moving forward as we have ever been since the depths of the Great Recession.”

Regarding prices…

“Due to strong growth, we are expecting house prices to increase 4.0 percent in 2015.”

But there were some warnings…

On available supply:

“With low mortgage rates, improving labor markets, and rising demand, one key issue for housing over the next two years will be the lack of supply of for-sale and for-rent homes.” “Many metro areas that have seen robust job growth and population increases are facing shortages of available for-sale inventory.”

On interest rates:

“However, by the end of the year long-term interest rates should only increase modestly, ending the year at about 4.3 percent for the 30-year fixed rate mortgage.”

Note: Freddie Mac worded this as being not that crucial. However, a 4.3% mortgage rate is about a .75 increase over current rates.

Bottom Line

Things are looking good for the real estate market. If you are thinking of selling, contact an agent to discuss how this applies to your neighborhood.

Five Spring Home Buying Strategies

The spring home-buying boom is underway, and this year buyers in some markets will face an increased amount of competition due to low housing inventory. In fact, the most recent existing-home sales report from the National Association of REALTORS® cautions that "Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices."

Real estate professionals around the country are echoing the concern about the lack of available housing options. "The [housing] recovery appears slow due to a lack of inventory and a low participation rate among first-time buyers, but it’s still a competitive seller’s market," says David Yocum, a Redfin agent from Chicago.

In order to be successful in competitive markets, buyers need to be strategic in how they approach finding their dream home. Here are five tips they can incorporate into their home buying process that will prepare them with all of the information they need.

Step Away from the Computer

Despite the fact that 90 percent of home buyers start their search online, buyers should also consider getting outside and canvassing their desired neighborhoods. In a low inventory market, it's important to to be proactive and not waste time weighing options, because by that time, the property might be off the market. "In our market we hope for a burst of new inventory in the spring, but that doesn't always happen,"  "Even if that burst comes, demand will outstrip supply, so buyers have to be in a position to make a decision quickly."

Get to Know the Current Housing Market

Every housing market is different, so it's important to do research on the market and neighborhood trends. Finding a good real estate agent and keeping up with local real estate news is crucial for buyers to understand the nuances of their local housing market. "Buyers need to get up to speed quickly on market values so they know the right decision when it presents itself," says Yocum. "The more quickly buyers can educate themselves, the more successful the home search will be."

Grab Those Low Mortgage Rates—Before it's too Late!

While mortgage rates continue to hover below four percent, buyers might not be able to enjoy these low rates forever. "With all indications pointing to a rate increase from the Federal Reserve this year – perhaps as early as this summer – affordability concerns could heighten as home prices and rents both continue to exceed wages," says NAR chief economist Lawrence Yun.

Create a Dynamic Team

The fast pace of the most competitive housing markets means buyers have to be in a position to make an offer at a moment's notice. Before making an offer, buyers need to ensure they've lined up a real estate professional, a lender, a lawyer, and a home inspector. They will also want to be pre-approved for a loan and ready to complete a mortgage application as soon as they find a property.

Be Prepared for Bidding Wars

Buyers should be strategic when maneuvering a bidding war. Some agents suggest that buyer clients include an escalation clause, while others suggest they examine the deal and identify areas where they could be more flexible, in terms of contingency clauses. However, Yocum warns that "all of these [contingency clauses] have various levels of risk that not all buyers are willing to accept, and you should consult with your team before [removing] any of them."

Loan Program Update

There are some pretty good loan programs out there that many buyers and agents are not aware of. 

FHA Sapphire. 

FHA Sapphire is a regular FHA loan with higher than usual FHA rates, but the buyer is only required to put down .50% instead of 3.5%. The program allows us to credit the buyer 3%-5% depending on the program they choose to help with closing costs, and the remainder of the down payment. It does have income limits and the maximum loan amount will be $417,000.00. The .50 down from the buyer can be a gift. The income limits are $78,315.00 in Los Angeles County, $97,635.00 in Orange County and $102,005 in Ventura County. Please also note that the buyer will have to pay 1.5 points on the loan and the rates are typically .50% higher for the 3% Grant and 1.0% higher for the 5% grant. This is a great product for first time home buyers that are struggling to save up a down payment. We can refinance the buyers in as little as 7 months to lower their rate back down. The Grant does not have to be repaid!

What do you have to lose?

Is the Housing Market BACK?

Is the Housing Market Back? Ask Lowes & Home Depot!

 A recent Bloomberg Business article reports that both Lowes & Home Depot experienced fourth quarter profits that beat revenue projections by the most in six quarters. So what does that mean to the housing market?

Consumer Confidence

Lowe’s Chief Executive Officer Robert Niblock said,

“Consumers are feeling better about their jobs, their wages and certainly feeling better about the value of their home, they are re-engaging in projects that they have put off.”

Sales to professional contractors have increased significantly as well, and were a driving factor in the quarter. Home Depot’s Chief Financial Officer Carol Tome calls this a “sign of health. If they are putting more items in their basket, it means they have work coming at them.”

Home Values Rising

In a quarterly consumer survey conducted by Lowe’s since 2007, the percentage of respondents who said that the value of their home is rising increased to its highest value ever, at 50%. Whether Americans are finally adding that man-cave they’ve always wanted, or renovating a master suite, an increased confidence in the value of one’s home often sparks homeowners to invest in big-ticket projects. The National Association of Realtors (NAR) reports that the median price of an existing home (for all housing types) rose year-over-year for the 35^th consecutive month. Not all who are renovating are planning on staying in their home. The Demand Institute reports that “nearly half of American households plan to move at some point in the future.” For those who are planning on listing their home this spring, spending the time and money needed to update that 1950’s bathroom or kitchen can fetch higher prices in today’s market.

Bottom Line

Meeting with a local real estate professional can give you insight into the small (or big) improvements your home could use to draw the highest price and return on investment this spring.

How Much Money Do I Need To Buy A In Santa Clarita Valley, Ca?

 
In a recent survey, How America Views Homeownership, it was revealed that 68% of Americans feel that now is a good time to buy a home and 95%said they want to own a home if they don’t already. Franklin Codel, head of Wells Fargo home mortgageproduction, explains:

“Although the home buying process has changed in many ways in recent years, our survey found Americans still view homeownership as an achievement to be proud of and many believe that now is a good time to buy a home.”

Confusion Creates Paralysis

However, the survey also reported that many are afraid to purchase a home because of uncertainty about “qualifying for a mortgage or navigating the home buying process”. Though 74% said they “know and understand” the financial process involved in buying a home, they also gave answers that suggest otherwise. For example:

• 30% of respondents believe that only individuals with high incomes can obtain a mortgage
• 64% of respondents believe they must have a “very good” credit score to buy a home
• 44% believe that a 20% down payment is required

In actuality many of these beliefs are unfounded. Let’s look at the question of down payment: Freddie Mac, in a recent blog post addressing the issue, confirmed that there is misinformation regarding the amount necessary when determining the down payment for a home purchase:

“Did you know 40 percent of today's homebuyers using mortgage financing are making down payments that are less than 10 percent? And how about this: since 2010, the number of people putting down less than 10 percent for conventional loans has grown three fold.  So, not only are low down payment options real, they represent a significant portion of today's purchases.”

In a separate Executive Perspectives, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management explained further:

• A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
• Qualified borrowers can further reduce the down payment coming out of their own pockets to 3 percent by lining up gifts from family, grants or loans from non-profits or public agencies.

Education is the Key

Boyle talked about the importance of educating potential buyers:

“Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”

Codel agreed:

“It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA loan programs or VA loans for veterans.”

Bottom Line

If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You CAN pay cash or you put as little as 3% down to purchase a home? ___________________________________________________________________

Interest Rates and Your Family's Wealth

With interest rates right around 4%, many buyers may be on the fence as to whether to act now and purchase a new home, or wait until the end of the year. If you look at what the experts are predicting for 2015, it may make the decision for you.

Predictions for 2015 3Q:

• 4.6% - Fannie Mae

• 4.8% - Freddie Mac

• 5.2% - Mortgage Bankers Association

• 5.2% - National Association of Realtors

Even an increase of half a percentage point can put a dent in your family’s net worth.

Let’s look at it this way…

The monthly payment (principal & interest only) on a $250,000 home today, with the current 4.1% interest rate would be$1,208. If we take that same home a year later, the Home Price Expectation Survey projects that prices will rise about 4% making that home cost $10,000 more at $260,000. If we take Freddie Mac’s rate projection of 4.8%, the monthly mortgage payment climbs to $1,364. Some buyers might not think that an extra $156 a month is that bad. But over the course of 30-year mortgage you have spent an additional $56,160 by waiting a year. 

Why Do I Need A Real Estate Agent?

Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO. The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover. 

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

There are over 230 possible actions that 
need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to theNational Association of REALTORS, “the typical FSBO home sold for $208,000 compared to $235,000 among agent-assisted home sales.” Get the most out of your transaction by hiring a professional.  

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer? Dave Ramsey, the financial guru advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line:

You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

List Your Santa Clarita, Ca Home Today!

We all learned in school that when selling anything, you will get the most money if the demand for that item is high and the inventory of that item is low, remember Cabbage Patch Dolls? It is the well-known Theory of Supply & Demand. If you are thinking of selling your home,  that the time is now. Here is why…

According to research at the National Association of Realtors (NAR), buyer activity last month (January) was three times greater than it was last January. Purchasers who are ready, willing, and able to buy are in the market at great numbers. 

Buyers are ready to buy a home in Santa Clarita, Ca, but they are coming upon situation of lack of listings. Many sellers say they are waiting for the spring to list their homes! WHY?

Low Inventory=Less Competition

Many sellers find it more convenient to list their homes in Spring, however you are thinking like all the other sellers out there.  In order to get top dollar when you sell your Santa Clarita home, you must think outside of the box.   Would you rather list your home for top dollar now and have no competition or would you rather list your home in spring and have 10 of the same types of homes as yours on the market, some who may be priced lower than yours.  Think about it, same house on the market as yours listed for lower, which one would you make an offer on first? With fewer homes on the market now, your home will get more attention from buyers.  Low inventory and higher demand also drives up prices.  

By Spring we expect many more home owners to list their homes because more sellers have equity that they didn't in years past.  It is normal for inventory of homes to rise in the Spring, don't be left out of getting top dollar for your home now!

Thinking of Buying A Home In Santa Clarita, Ca? Why Are You Waiting?

If you are planning on becoming a homeowner, or moving up to the home of your dreams in 2015, here are four great reasons to consider buying a home now, instead of waiting until spring.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects appreciation in home values over the next five years to be between 11.7% (most pessimistic) and 27.5% (most optimistic). The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of 2015. An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren't? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Did You Serve in The Armed Service? VA Loans Are Available To Purchase a Home in Santa Clarita, Ca!

If you have ever served in the armed services did you know you have the opportunity to receive a VA Loan to buy a home in Santa Clarita, Ca? Here are some facts about VA loans:

1.) VA loans are with zero down and very little out of your pocket!

2.) Veterans can qualify to purchase a home 2 years after a short sale or foreclosure and very favorable time frames after a BK.  

3.) VA programs can include co-borrowers who are not Veterans

4.) No minimum credit score for Veterans to qualify VA

I am here to help someone who has helped us! Please let me know how I can serve your real estate needs!

VIEW SANTA CLARITA, CA NEWEST LISTINGS!

View all of Santa Clarita California's newest listings:

http://www.wendyshomevalues.com/santa-clarita-ca-area-new-listings.aspx

Are There Tax Benefits to Owning Your Santa Clarita Home?

Buying a home is often the biggest purchase we make in our lifetime. It can provide financial and income tax benefits, as well as emotional satisfaction. With the buying season just around the corner, potential buyers should get their finances in order and get pre-approved for a mortgage before starting their hunt.

It’s important for buyers to know the tax implications and deductions of becoming a homeowner. Did you know that buying a house can qualify you for breaks on your income tax like tax deductions for mortgage interest, property taxes, and special treatment of gains when the home is sold? You should consult with your tax advisor to get a complete understanding of how the tax laws may apply to your situation.

Let’s take a quick look at the applicable tax credits and deductions when it comes to owning a home. Keep in mind these rules only apply to a personal residence, not an investment property, vacation home, home office or rental unit.

The tax benefits of home ownership can be substantial.

Down Payment
Closing Costs
Repairs, Remodeling, Construction Costs
So, what can I deduct?
Benefits on the sale of your home

Even though your down payment is not tax deductible, using cash from your retirement plan to fund the down payment can have tax advantages. When you cash out, let the plan administrator know you intention for the distribution. If you are under age 59 ½, you can avoid the early withdrawal penalty if you are a first time home buyer and the funds are used for things like buying, building or rebuilding a first home. Keep in mind that even though you avoid the penalty you will still owe taxes on the amount of the distribution.

Closing costs are not deductible. However, be sure to carefully review the escrow settlement statement for deductible items such as property taxes and loan origination fees (points). Keep track of the closing costs associated with any refinancing as these can lower a profit when you sell the home. Points paid in a refinance can be amortized over the life of the loan and deducted on your tax return.

Any repairs, remodeling, and construction costs made to your home are also not deductible unless they are for major improvement such as a new water heater, roof replacement, additions, kitchen remodels, new windows, etc. Non-deductible items include plumbing repairs, maintenance, painting, and cleaning. Do not dispose of any of these receipts while you own the home as all of these expenses can be added to basis to reduce taxable gains when you sell.

Many homeowners find that the amount they pay in interest on their mortgage and annual property taxes is enough to incent them to itemize their deductions. Should you chose to deduct mortgage interest and property taxes, you can use Form 1098 which you will receive in January of each year, showing how much you paid in mortgage interest. If you have an impound account with the lender, the total amount paid in property taxes will be reflected on this form as well.

Another way some homeowners can qualify for additional deductions is by getting a home equity loan. Since the interest paid on a home equity loan qualifies as a deduction, the money borrowed could be used to pay off other debts where the interest is not deductible.

For many years, tax laws allowed you to avoid paying capital gain taxes when selling your home only if you rolled over the proceeds into a home that was more expensive. There were also some rules that allowed individuals over the age of 55 to avoid some taxes.

In 1997, those rules were changed. Now the IRS may allow you to exclude any gains on selling your house if you meet certain requirements. Always consult your tax advisor for more details.

The tax benefits of home ownership can be substantial. Always check with a tax expert prior to purchasing your home to make sure you’re getting the tax benefits you’re expecting. Be sure to keep good records regarding the purchase of the home and any improvements you make. Pay attention to when you make property tax and mortgage payments to ensure they fall in the year you want to take them as itemized deductions. Finally, if you have special circumstance(including a potential large gain if selling your home), always get an experts advice to make sure you get the maximum benefits allowed under tax laws.

Rent or Own, Either Way You Are Paying A Mortgage!

Either Way You Are Paying A Mortgage! There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either your mortgage or your landlord’s. As a paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.” Also, if you purchase with a 30-year fixed rate mortgage, your ‘housing expense’ is locked in over the thirty years for the most part. If you rent, the one guarantee you will have is that your rent will increase over that same thirty year time period. As an owner, the mortgage payment is a ‘forced savings’ which will allow you to have equity in your home you can tap into later in your life. As a renter, you guarantee the landlord is the person with that equity. Bottom Line Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting since home values and interest rates are still lower than projected.

Homeownership Is The Best Way To Build Wealth

Homeownership is The Best Way To Build Wealth! The New York Times recently published an editorial entitled, “Homeownership and Wealth Creation.” The housing market has made a strong recovery, not only in sales and prices, but also in the confidence of consumers and experts as an investment. The article explains: “Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth.” Many of the points that were made in the article are on track with the research that the Federal Reserve has also conducted in their Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36x greater than that of a renter ($5,400). One reason for this large discrepancy in net worth is the concept of ‘forced savings’ created by having a mortgage payment and was explained by the Times: “Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.” “Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.” Bottom Line “As a means to building wealth, there is no practical substitute for homeownership.” If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!