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Is my interest cost deduction going away?


So what is all the fuss about? If you currently own a home, and are not moving soon, it will have no impact on you. However, if you move into a new home, with a purchase price of at least $500,000 you will be impacted. The change is a reduction from the previous price limit which was $1,000,000. So more people will be impacted, and especially in areas with higher home prices.  In addition, if you are on the lower end, doubling the standard deduction may result in a greater tax benefit than the mortgage interest deduction. I will see if I can come up with an illustration to show this a bit better.  In the meantime, to the extent that some people will be better off not itemizing, and taking the standard deduction, the tax process will be simpler and less costly, and may even put some tax accountants out of business.

Why should I list during the Holidays?


If you are at all interested in selling, there are several reasons why the Holiday Season is a great time to sell! Are you ready?

1.  People who look for a home during the Holidays are more serious buyers!

2.  Serious buyers have fewer houses to choose from during the Holidays and less competition means more money for you.

3.  Since the supply of homes will dramatically increase in January, there will be less demand for your particular home! Less demand means less money for you!

4.  Houses show better when decorated for the Holidays!

5.  Buyers are more emotional during the Holidays. so they are more likely to pay your price.

6.  Buyers have more time to look for a home during the Holidays than they do during the working week.

7.  Some people must buy before the end of the year for tax purposes.

8.  January is traditionally the month for employees to begin new jobs. Since transferees cannot wait until Spring to buy, you must be in the market now to capture that market.

9.  You can still be on the market, but you have the option to restrict showings during the six or seven days during the Holidays!

10.  You can sell now for more money and we will provide for a delayed closing or extended occupancy until early next year.

11.  By selling now, you may have an opportunity to be a non-contingent buyer during the Spring, when many more houses are on the market for less money! This will allow you to sell high and buy low!

Is now a good time to buy or sell?


In a nutshell -- yes!  The main reason for this answer is the low level of interest rates.  They have been low for an abnormally long time thanks to federal reserve policies and a weak economy.  And they will most likely start increasing early next year. The Federal Reserve has already given notice that they will be increasing interest rates next spring. That does not necessarily mean that mortgage rates will increase in lockstep, but the tendency will most definitely up.

so -- how do interest rates impact home sales?

Buyers -- on the buyer side, the price of homes that a buyer can qualify to purchase will decrease. Consider this, if an individual will qualify for a $200,000 home with a 30 year loan, and no down payment (to keep it simple), with an interest rate of 4.0%, the monthly payment will be $954.83, not counting insurance and taxes.

If interest rates go to 5%, to keep the payment the same, the buyer can only qualify to buy a home with a price tag of $177,865. 

Sellers -- since all buyers now qualify for lower priced homes, there is downward pressure on prices.

What is the market doing?


At this time of year, the market is slowing, as school has started and people do not generally change jobs at this time of year. However, it is important to realize that homes sell every month of the year. For example, in June of this year, 284 homes were sold, while 143 sold during September.  So homes are still selling, just not as many.

Also, inventory has been low for the past couple of years, especially up to $200,000. At the current time, there is 3.4 months supply of homes up to $200,000, while it increases dramatically to 6.9 months between $200,000 and $300,000. Equilibrium between buyers and sellers is considered to be around six months. Anything less than six months is considered a sellers market, and anything more than six months is considered a buyers market. Of course, in any market, there are always some homes that are overpriced, and some sellers that are more motivated than others.


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