In keeping with last weeks blog on how to stay in your home we are going to take a quick view of the markets this week and then offer some articles on how to maximize your tax benefits and how to manage property if you now realize you want to rent rather than sell until the dust clears.
MSNBC: Housing worst isn’t here yet. According to Richard Syron, chairman and CEO of Freddie Mac “The mortgages written in 2006 in the sub prime market are probably the most troublesome. They haven’t hit the reset point yet on interest rates.”
Syon went on to say "These steps are focused on helping individual people, and it will help the market. But once you get one of these market dynamics going, you don’t reverse them without it taking some time .... Theyve got to play themselves out.” NOTE: This is the best wisdom on changing markets yet! You can talk about it all day long....but trends play out according to changing circumstances and can be inconsistent.
International Herald Tribune: The S&P Housing index was released and it is an index based on twenty cities. The famed Robert Schiller is involved in crating this index and "He said the numbers indicate "a widespread downward trend" that started at the end of 2006 and has extended into the beginning of this year." How Steep a Downturn? The index looking at ten major metro cities notes a 1.5% decline in sales of single family homes. Seattle and Portland are the lucky ones with modest price increases.
Freddie Mac: Weak home sales are keeping a lid on mortgage rates. The 30-year fixed-rate mortgage (FRM) averaged 6.16 percent down slightly from last week. Last year at this time, the 30-year FRM averaged 6.58 percent. The fifteen year FRM this week was 5.87 and down slightly form the week before.
Now for the good news: Seattle, Portland and Dallas saw rising prices... There are always minor trends within a major trend...in other words its still a local market. Relief is on the way, to be sure it isnt enough to turn a trend but we hope to keep enough bad news out of the markets to keep this downturn moderate and cyclical. Here are some of the important institutions helping to keep people in their homes:
1. Washington Mutual Inc., one of the country’s largest financial institutions, said it will refinance up to $2 billion in sub prime mortgages to help borrowers avoid default and foreclosure.
2. Citigroup and Bank of America have pledged $1 billion of mortgage financing to help sub prime borrowers who are facing the loss of their homes
3. Freddie Mac will buy as much as $20 billion in fixed-rate and adjustable-rate mortgages to help borrowers with high-priced loans keep their homes. Hopes are this should be in place by mid summer.
Renting requires a working knowledge of your local rental markets and a good understanding of how to price your rental so that it rents quickly and at the right price. Too low and you will rent very quickly at at a loss....too high and it will sit on the market and you will lose months of valuable rental income.
Taxes and tax credits are areas where savings can be had but you must know whats available. We found a few good articles that can serve as a tutorial. Please do take a look:
A Tax-Break Tutorial For New Homeowners: By Bill Bischoff. While the cost of renting is generally a nondeductible expense (except for when part of the home is used for business purposes), homeowners can claim an itemized deduction for interest on up to $1 million worth of mortgage debt used to acquire or improve their principal residence. Ditto for interest on up to $100,000 of home-equity debt secured by their principal residence. Real-estate property taxes can be claimed as an itemized deduction, too. You also can generally deduct any points you paid (or the seller paid on your behalf) to take out the mortgage"
A Primer on Homeowner Tax Breaks: Now for the tax-law catches your realtor probably never told you about. Don't worry: What's detailed below probably won't have you running back into the arms of your landlord. But it just might give you a more realistic expectation of how home ownership will affect your future tax bills.
Mortgage insurance Gaining Steam: "This time next year, some homeowners who pay mortgage insurance will have an extra deduction on their federal income tax returns."
"In recent years, many borrowers have opted to get around using the insurance by taking two loans: a primary mortgage as well as a second, "piggyback" loan in the form of a home equity loan or line of credit. The equity from the second loan fulfills the down payment of the first, and there are tax breaks on the interest of both loans.
But many piggyback mortgages have variable rates that fluctuate based on the prime rate, which has risen over the last year. The set rate for mortgage insurance has become attractive to homeowners aiming for predictable loan costs, Katkov said. There's also the lure of simplicity that the mortgage insurance offers, since borrowers only need to deal with one set of loan documents in that option, he added. "
Its your property