Archive for December, 2012

What is Going on in Today’s Housing Market?

by: Maria Hass –
Metro Phoenix is without doubt one of the leading U.S. cities in home value appreciation. Within the past eight months, home prices have gone up by as much as 30 to 40 percent in this market, depending on location.

Available inventory of homes is very low and the demand for houses is high, pushing prices up. Historically low interest rates at 3 to 4 percent have fueled the buying frenzy and the news that prices are going up created a “sense of urgency” among many buyers to take action now.

The supply of homes is increasing, however. At this writing, there are around 18,000 homes for sale in the Phoenix MLS. However, in order to achieve a balance of supply and demand, we need an inventory of around 36,000 homes. We are therefore still short 50 percent in terms of housing inventory.

Where is the market headed?

Increased Inventory– It is possible that supply of homes will continue to rise due to sellers overpricing their homes. These homes will sit on the market as new listings come in.
Many of the homes for sale are sold by regular homeowners, in contrast with bank-owned homes that have dominated the industry in the past several years. These sellers have motivation to get top dollar for their homes and will not “give their homes away.”

Interest Rates – The very low mortgage interest rates motivate buyers to purchase homes. If interest rates go up anytime soon, the buying strength will fizzle out — especially among investors — which could cause a higher inventory of homes and lower demand, which would push home prices down slightly.

However, price fluctuation will still be location-specific. There will be areas of the Valley with better results than other areas. If price declines occur, they will most likely begin to affect higher-price range homes before reaching the lower-price homes.

Renters to Homeowners – Homeowners who became renters as a result of a past foreclosure or short sale will be eager to own a home again in three to four years. These buyers will make up a significant part of the buying pool in the next year or so. Unlike investor buyers, this type of buyers are looking to live in the property and their decision to purchase a home is NOT solely based on price. They most likely will buy in any market to satisfy their need for a home.

Summary – Inventory will continue to rise due to sellers overpricing their homes. If interest rates go up, buying demand from investors will slow down, resulting in possible minimal price declines depending on location. Renters becoming homeowners will help strengthen the buying demand.

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December 15, 2012 at 10:43 am Leave a comment

Washington’s Unfinished Business Could Have Huge Impact on Housing Recovery

by: Maria Hass –

The impending expiration of Mortgage Forgiveness Tax Relief remains unfinished business on Capitol Hill.
The National Association of Realtors is continuing its efforts to ensure an extension is passed beyond the current deadline of December 31, 2012. An extension would mean that homeowners who short sale their homes will be exempted from paying income tax on the balance between what they owe and what they sell the house for.

With the extension, a seller could save $25,000 on a $100,000 short sale, if they are in a 25 percent income tax bracket. That is obviously a significant savings. Restrictions apply to the exemption, so please consult your tax adviser. If an extension is NOT passed, short sales will become less attractive, probably resulting in more foreclosures and a slowdown in our housing recovery.

On another note, the President’s Deficit Reduction Commission has released preliminary recommendations to change how the country spends money and collects taxes. One of its provisions calls for dramatically limiting the Mortgage Interest Deduction (MID). Up until now, no decision has been reached on the changes to the MID, which is a tax incentive allowing homeowners to deduct the interest on their mortgage payment from their income taxes, based on their federal income bracket. This is a huge tax savings and a leading benefit to home ownership. The loss of MID would make taxes on home ownership very costly. It would also discourage homeowners from applying for home loans or keeping a loan, since there would be potentially no tax benefit.

Lawmakers continue to spend more than what they earn. Now, they are looking to get money from homeowners by taking away the tax benefit that attracted homebuyers to purchase homes in the first place. The National Association of Realtors (NAR) has issued a call to action for Realtors to let their Congressional representatives know that a change in MID would be extremely detrimental to the recovery of the housing industry.

December 6, 2012 at 10:15 pm Leave a comment


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