I went to a seminar this week that was given by a CA Realtor Association lobbyist who works in Sacramento and gave us some scary information about proposed leglislation that they are fighting against.
Here are some of the highlights of what he told us:
1. The CA state sales tax could soon include services from lawyers, doctors and realtors. For example, if a realtor charges and collects 5% of the purchase price of a million dollar home, that 50k would be taxed at 9.75% and that money would have to be collected and sent to the state like a normal sales tax. I personally think the chances of this passing are slim. The administration costs would be enormous. Who pays, who collects, who send to Sacramento?
2. Challenges to Prop 13. More power is being transferred to city governments vs. the state government and thus, cities want to challenge prop 13 to get more money to pay for services, debt etc.. This one could be interesting.
3. Mortgage interest deduction. This is more of a federal government proposition. I really doubt we will see this as a major sweeping change for tax purposes. But more likely possibilites include income property or second home deduction changes or elimination of those, elimination of the mortgage interest deduction for high income individuals (250K and up)? Who knows how this one will play out but I will be watching and happy to support this being killed.
4. Reduction of the jumbo conforming loan limits from 729k down to 625k or below. This could make a big impact in our area since the average sales price is over one million dollars. They will also raise down payment requirements and fees for Fannie and Freddie loans which means less people will qualify for those. These changes are the most likely of the items I have discussed to occur.
So my advice to potential home buyers is… BUY NOW!
Summer 2009 is here and along with the sand, surf and sunshine this year comes some real values in real estate! Our current market conditions have left a lot of people talking about real estate – seems like people never really stop talking about real estate. It is cyclical and that is to be remembered – we’re either talking it heading down or revelling as it heads up. Today’s chatter is usually about how much lower the prices are now then they were a few years ago and thus we have some real values in today’s market. A few years ago it was all about the gain – which brought along with it the lowest affordability index ever. It’s been over a decade since California has seen an affordability index so favorable – it was only 3 years ago that it was in the 26% range (meaning 26% of first time home buyers could afford the average priced home in CA.– now it’s up to 69%.) Federal aid to first time homebuyers has increased to $8000 from $7500 from 2008 to 2009 – so the Feds are obviously trying to ramp things up. The State of California has its own 2009 Tax Credit of $10,000 to a single family home buyer of a home that has never been occupied and that is intended as a principal residence…click here for complete info. They have allocated $100 million dollars to this and at this time of writing they have already closed the application process as they have allocated all the money so far!
Inventories are down and pending sales are up…and Dataquick is reporting the number of California home sales in May are up for the 11th straight month. Here in the Hollywood Riviera there are currently 25 homes in escrow/pending sale compared to only 10 in escrow/pending on May 21, 2009. That’s a big jump in 6 weeks time. The average prices are off a bit, but a great time for buyers and obviously they are thinking so too right now!
Oh my gosh… they must be kidding! The new budget is calling for a reduction of the mortgage interest deduction. This reduction in deductible expenses will be for high income earners making more than $250,000 a year. This group will see the deduction fall to 28 cents per dollar down from the current 35 cents for every dollar of their deductible expense. In our area, this will effect a vast majority of home-buyers, which will further erode sales. Please, please call your congressperson, your Senators and tell them no way, no how. Here is today’s news release we received from the National Association of Realtors, who plan on fighting this all the way, and why they are doing so:
||Dear Fellow REALTOR®,You may have seen news reports about President Obama€™s budget proposal that was released today at 11:30 AM Eastern Time. A small section of the sweeping budget plan has the potential to become a major impediment to a recovery in real estate markets across the nation. NAR is 100% opposed to the provision that modifies the Mortgage Interest Deduction and is prepared to use its formidable array of resources against its enactment.As currently drafted, the plan changes the Mortgage Interest Deduction by reducing the amount of mortgage deductibility on families earning over $250,000. This proposed change in the Mortgage Interest Deduction will result in further erosion of home prices and home values. If this proposal is enacted it will lead to a new round of price depreciation, will cause greater distress on the balance sheets of banks as the collateral value of mortgage backed securities declines. A second credit crisis could emerge before the first one is resolved.As you read this NAR is launching a multiphase plan of action to eliminate this provision from the budget plan. In the next 24 hours, NAR will be expressing our concerns directly to President Obama, to all members of the United States House of Representatives and the Senate, placing advertisements in the publications read by Washington, DC decision makers. Additionally, NAR will be forming a coalition with other groups affected by this proposal. This communication is the first part of our response, we will continue to update you as the situation and events warrant.Sincerely,
Charles McMillan, CIPS, GRI
2009 NAR President
Stop Proposed Tax Withholding Change!
The Legislature will shortly be considering a budget proposal that, among other things, would require a 3% withholding on all payments to independent contractors. We are opposed to this measure, along with the California Association of Realtors.
Please call BOTH your legislators RIGHT NOW to OPPOSE this provision!!
Call your Assembly Member at (916) 319-2053.
Call your Senator at (916) 651-4028.