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Pending home sales are down and additional declines are expected from abnormal weather conditions, according to the National Association of Realtors®.
Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January 2010, fell 7.6% to 90.4 from an upwardly revised 97.8 in December, but remains 12.3% higher than January 2009 when it was 80.5.
With prolonged bad weather in much of the nation, abnormal swings in housing data is not all that abnormal. The real question that remains to be seen is, what happens when the first time homebuyer tax credit expires at the end of April. Stay tuned…
The real estate smart search engine Trulia just recently released its March 2010 Reduction Report revealing that homeowners were finally coming in line with agents about what their homes are really worth. March marked a record low in residential property price reductions due to a more realistic outlook of the real estate market by the American public as a whole.
The news comes as President Obama’s $8,000 credit for first-time home-buyers and $6,500 tax credit for repeat home-buyers comes to an end in the near future. Contracts must be signed by April 30, and loans must be closed by June 30 in order to qualify for the credit. The incentive is credited with many American’s purchasing homes for the first time last year.
Trulia’s Reduction Report cites increasingly positive news that the real estate market is indeed on its way to recovery. Home price reductions in February managed to drop to its lowest levels in 10 months. Moreover, prices in 19 percent of homes on the market as of March 1 were reduced.
Although home sales have dropped, many agents blame external factors such as bad winter weather, and pricing disputes between agent and seller. In fact, many states are still facing disagreement between buyer and seller.
The overall consensus, however, is that as homeowners face the reality of fair home prices, the market will stabilize. If a house is priced for this market – then that means less time on the market and more turnaround. Stagnant houses are simply bad news for the economy.
Interest rates gain the most attention from mortgage borrowers, but two other expenses, points and mortgage insurance premiums, are significant, as well. And both may come into play as you fill out your tax returns this year.
When you shop for a mortgage loan — which is something every potential home buyer should do — you will be given a lot of information. Loan points are among the items that must be listed on the good-faith estimate of closing costs given to you before you commit to the loan. The good faith estimate also attempts to explain — in simple English — all of the terms and conditions of the mortgage loan you are considering.
Each point is 1 percent of the amount of your mortgage loan. So if you were to borrow $350,000, each point would cost $3,500. Lenders can charge as many points as they want, but at some level, the loan becomes usurious and could represent what is commonly known as "loan sharking."
Points paid to obtain a new mortgage are fully deductible in the year they are paid by the borrower. The Internal Revenue Service originally required that the borrower write a separate check to the lender for these points, but in recent years, the IRS has backed off of this position. If you pay points to obtain a refinance loan, however, in most circumstances those points are not deductible in full for the year they are paid. Rather, the IRS requires that you allocate the points by the number of years of your mortgage loan.
Sometimes during negotiations, especially during slow market times, a buyer may ask a seller to make certain financial concessions, such as the seller paying some or all of the buyer's closing costs. The IRS allows seller-paid points to be deducted by the buyer, and although the seller cannot deduct this expense, the IRS allows seller-paid points to be deducted by the buyer. It can get complicated, so if you were involved in a seller-paid-points transaction, discuss your situation with you own financial advisor or accountant.
For more information, go to the IRS Web site, and print Publication 936, "Home Mortgage Interest Deduction." This information is general in nature. Every taxpayer has different situations. You must consult your financial advisor or accountant on your set of facts.
With tax time upon us, many people are suddenly realizing they don't have the money to pay their taxes. What do you do if you find yourself in this situation?
If you have questions or comments, use the comment link below. If you can't pay your taxes, don't contact us. We can't help you there.
