Category: Buying

Buying

Study Calls Today’s Market Good Time to Buy

Researchers from several universities have just completed a paper that looks at what they call the hurdle rate. This is the point at which it’s equally smart to rent or buy if your only criterion is to build wealth. Based on today’s hurdle rate, it’s a better time to buy than to rent, because you can build more wealth owning than renting.

The study looks at what they call an indifferent renter. This is someone who is just as happy renting as buying depending on which choice is better at building wealth over a holding period, in this case eight years. The study assumes the renter puts the savings from renting into an investment to earn a return.

The hurdle rate is the point of equilibrium between renting and buying where it’s a wash in terms of wealth building. If today’s hurdle rate rate is lower than the average past property appreciation rate for a particular market, then it makes sense to buy, because future property appreciation should be such that an individual will, on average, create more wealth through owning rather than renting. On the other hand, if today’s hurdle rate is higher than the average past property appreciation for a particular market, then this is a sign that ownership can be a drag on wealth creation.

“It’s not a perfect reason to buy, it’s just a test,” says Ken. H. Johnson of Florida International University in Miami, one of the authors of the study, called “The Rent vs. Buy Decision,” released about two weeks ago. “But it’s a good sign that the market’s turning.”

The paper is part of a series Johnson and some other researchers have been doing on the rent vs. buy decision. This paper just looks at the narrow topic of the hurdle rate; other papers look more broadly at whether it makes sense to rent or buy based on financial considerations. In one earlier paper, renting can make more sense in some instances, at least in the short run, if renters invest all of their savings over a period of time in an instrument that generates a yield comparable to what they would earn in appreciation on a house in their market. But since few renters could realistically invest all of their savings from renting, it’s more appropriate to assume renters don’t invest all of their savings. And in these cases, owning is the overwhelmingly better investment over the holding period.

http://speakingofrealestate.blogs.realtor.org/2012/02/13/study-calls-todays-market-good-time-to-buy/

Buying

Hattiesburg Real Estate

1301 Marie St.  Hattiesburg , MS 39401  $139,900

3 bedroom, 2 bath. Large living/dining area. Separate den with fireplace. Large corner lot.

Call Crye-Leike today for details!

 

 

Buying

10 Critical Questions for Homeowners at Tax Time

1. How much of my mortgage payment is tax deductible?
On a Schedule A, you can deduct the following:
* Interest on debt used to buy, build or improve your primary or second home (called acquisition debt), as long as mortgages totaled $1 million or less ($500,000 if single or married filing separately).
* Mortgage insurance (or funding fees for government loans) for loans taken after 2006 as long as your adjusted gross income does not exceed $109,000 for a married couple (half that for singles and those married filing separately).
* Property taxes on first and second homes. Starting in 2010, however, you must itemize your deductions to get this tax break.

2. I sold my home this year. Will I owe capital gains tax?
As long as the property was your principal residence for at least two of the last five years, you can exclude $250,000 of your profit ($500,000 for married couples) from your taxable income. If you profited less than the $250,000/$500,000 threshold, no extra form is required. You can do this as often as every two years.

For those with profits that cannot be excluded, you’ll report your gain on a Schedule D, Capital Gains and Losses. There are special rules for vacation homes. You may be able to exclude some or all of your gain.

3. I lost money on the sale of my home. Do I get to deduct the loss?
Loss on the sale of a personal residence is treated like a loss on the sale of any personal property. It is not deductible. Losses on investment properties are deductible.

4. I bought or refinanced a home this year. Are my closing costs tax deductible?
You can claim a deduction for real estate taxes you paid as part of your mortgage closing costs. The same goes for prepaid interest. It will be included on the 1098 form your lender sends you. What about points? The IRS has a flowchart that you can use to see when points are and are not deductible. In general, you must have paid points to build, buy or improve your primary residence in order to deduct the entire amount in the year they were paid. Otherwise they may still be deducted but on a prorated basis.

5. What happens with points on a refinance?
This deduction is often overlooked, and it could be worth a lot. When you pay points on a refinance, they have to be prorated. For example, if you pay $3,000 in points on a 30-year mortgage, you can deduct $100 a year for 30 years. But if you refinanced again this year and have prorated points that have not yet been deducted–for example, you are 10 years into a 30-year loan and have only deducted $1,000 of $3,000 in points paid–you can deduct the remaining $2,000 in the year you refinance.

6. Does a mortgage modification affect my taxes?
If you modify your mortgage, one consequence might be that you pay so much less interest that you will save more by choosing the standard deduction rather than itemizing. Don’t just assume that itemizing is always best because you did it in the past.

7. Does a mortgage foreclosure affect my taxes?
The Mortgage Forgiveness Debt Relief Act of 2007 generally allows you to exclude income from the discharge of debt on your primary residence. However, this law does not cover investment properties and vacation homes, nor does it apply to forgiven home equity loans. You could end up paying income tax on this canceled debt. In addition, states’ rules for the treatment of forgiven mortgage debt vary, so check with a tax professional.

8. Can I deduct prepayment penalties?
Prepayment penalties paid on a mortgage are tax deductible in the year that they are paid.

9. What expenses am I NOT allowed to deduct from my income?
Unless your property is a rental or investment, you don’t get tax breaks for the following:
* Hazard insurance;
* Homeowners association dues;
* Principal payments on the mortgage;
* General closing costs like appraisal fees or title insurance;
* Local assessments to improve your neighborhood.

10. Does the health care tax have an effect on gains from property sales?
This tax, which is 3.8%, is one of the most misunderstood additions to the tax code. Reasons not to worry:
* It doesn’t apply until 2013;
* Your annual income must exceed $200,000 ($250,000 for married couples filing jointly);
* The tax is only applied to gains over $250,000 on a primary residence (or $500,000 if married).

About the author:
Gina Pogol has been writing about mortgage and finance since 1994. In addition to a decade in mortgage lending, she has worked as a business credit systems consultant for Experian and as an accountant for Deloitte. She graduated with High Distinction from the University of Nevada with a BS in Financial Management.
http://www.foxbusiness.com/personal-finance/2011/02/01/critical-questions-homeowners-tax-time/?intcmp=related

Buying

Congratulations Teresa!

Congratulations to Teresa Asquith!  Your dedication to your clients’ needs and passionate commitment to unsurpassed service has placed you #16 in the year end Crye-Leike Franchise Top 25.