If you own a Home you must read this!
The National Association of REALTORS is all over this and working to get it repealed, before it takes effect. But, I am very pleased we aren’t the only ones who know about this ploy to steal billions from unsuspecting homeowners. How many REALTORS do you think will vote Democratic in 2012? Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That’s $3,800 on a $100,000 home, etc. When did this happen? FACT: It’s in the health care bill and goes into effect in 2013!!! Why 2013? Could it be to come to light AFTER the 2012 elections? So, this is “change you can believe in”? Under the new health care bill all real estate transactions will be subject to a 3.8% Sales Tax.  If you sell a $400,000 home, there will be a $15,200 tax.

Kessler’s Take:
Let me start by thanking whoever started this email for nothing else other than citing the National Association of Realtors for advocating consumer rights as they are the number one watch dog group in the housing industry.  The group does not always get the credit they rightfully deserve.  The email goes on to point out an upcoming tax that is to be effective January 1^st of next year.

In a nutshell if a homeowner sells his/her house after January 1, 2013 they will be hit with a $3800 tax for every $100,000 their property sells for.  Well the email is not 100 percent accurate.  Yes, this new tax does take effect next year and yes there are some who are going to get hit with a new tax but the majority of people will not.  The National Association of Realtors developed an informational brochure titled “The 3.8% Tax – Real Estate Scenarios & Examples” which goes into great detail how the tax would be imposed.

For starters if the seller is an individual they would be exempt if their adjusted gross income is under $200,000, and if the sellers are a couple filing jointly they would not be affected if their adjusted gross income is under $250,000.  So, before we go any further if you are one of the 49 out of 50 households inAmericamaking less than $250,000 in adjusted gross income you need to read no further.

For the under 2 percent of homeowners left that could qualify for this tax the next set of exclusions apply.  For an individual this tax does not come into affect if their capital gains is not greater than $250,000 for the year they sell their home, for couples filing jointly it is $500,000.  Now how many couples out there will realize a profit of $500,000 on the sale of their home?

So, we are now left with a small amount of people who submit taxes with income greater than the threshold and who have made a huge profit on the sale of their property.  What happens to these few folks?  The 3.8 percent tax is applied to the profit above the threshold of $250,000 for those filing as individuals and $500,000 for those filing jointly.  An example would be if there was a $550,000 gain realized from the sale of a home sold by a couple the $50,000 excess of the $500,000 allowed would be taxed at a rate of 3.8% which would equate to $1900.

Personally I feel any tax tied to a real estate transaction in our current market is a detriment but I do understand the government is looking for revenue streams and those that attach to the “rich” are easier to sell to the general public than those that affect everybody.

As with any tax or policy change information is key.  Many homeowners are out there contemplating the sale of their residence and are concerned about this upcoming tax.  While it is great to see an email circulate warning of a potential issue it is a shame the research was not done to accurately portray the issue.

Knowledge is power and in this case it could prevent many sleepless nights.

Kessler’s Forecast:
This will have such a small impact on the housing market as it affects so few and those it does affect will be making such a profit the tax should not impede their future plans.

What will continue to impact the housing market and the overall economy is bad information.  Unfortunately the media does not always get it right as they are human too.  The next time you receive an email do a little research before it is treated like gospel.

RATES

Kessler’s Take:
The 30 year fixed remained at 3.87% nationally according to Freddie Mac’s Weekly Survey.  Last week I forecasted the rates would increase to 3.90%.  This week upcoming should see 30 year fixed nationally increase to 3.90%.  In the coming month rates should stay around the 4.00% mark.

Kessler’s Forecast:
Last week (2/16/2012) – 3.90%;
1 week (2/23/2012) – 3.90%;
1 month (3/28/2012) – 4.05%;
3 months (6/3/2012) – 4.15%;
6 months (9/10/2012) – 4.25%;
12 months (2/24/2013) – 4.55%

Reports

Previous Week:

Monday, February 13th
Kessler Housing Report
KMG Mortgage Consulting

Thursday, February 16^th
January Housing Starts
U.S.Census Bureau

Upcoming Week:

Friday, February 22^nd
January Existing Home Sales
National Association of Realtors

Friday, February 24^th
January New Home Sales
U.S.Census Bureau

The National Association of Realtors housing affordability index rose to a record 184.5 in 2011, based on the median home price, median family income and average mortgage interest rate.

Kessler’s Take:
For the life of me I do not get it.  Over the past couple of years the opportunity to buy a home has been within the reach of so many yet the masses have not taken the plunge.  Before I go on my rant, first let’s breakdown what this index is made up of.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home. The higher the index, the greater the household purchasing power.

So to make it really simple, 184.5 is a much higher number than 100 meaning the ability to afford a median priced house based on current median income is great.  So, what is the problem?  If the masses understand what a great opportunity it is, why aren’t more homes being sold?  Through the news media whether it be print, video or online the main topic that continues to arise is the lack of financing available for those looking to purchase a home.  They often cite greater underwriting criteria or a need for high down payments.  I will agree that guidelines for approval are stricter today than from the height of our real estate market but they do not affect those who can document their income.

I must have written this one hundred times in this report that financing is available if you can document your income and assets.  If I told you that I can qualify someone for a mortgage with the following would you still think/believe mortgage financing is that difficult to obtain?

• a credit score at or a little below 600 (National median credit score is 693)
• a debt to income around 55 percent (gross income / monthly housing payment & liabilities)
• a down payment of 3.5 percent of the purchase price and no other assets

In a nutshell I just described an applicant who would qualify for an FHA loan.  Now please do not get me wrong there is a lot more that goes into this equation, but the point is current guidelines allow for a tremendous amount of people to qualify for a mortgage.

Now that I have, in my mind, successfully proven financing is not the reason why there are so few taking advantage of this once in a lifetime opportunity, let’s talk about the real issue.  I believe it is as simple as one word, “FAITH”.  Faith that they will continue to have a source of income, faith that their assets as great or as little as they may be will continue to be there for them in a time of need, faith that our government will right the ship and become the world financial leader it once was and above all faith that the real estate market will again prosper as we have witnessed over and over again throughout the last 100 years.

I feel I should have a pulpit since I am throwing around the faith word so much and maybe I should, maybe we all should.  How bad would it sound if we all had a collected voice to tell those who can and have not taken advantage of the current housing market to get off the fence to take advantage of current conditions, take the leap of faith and purchase a home.  If you look at anyUScurrency bill it has four words on the back that read “In God We Trust”.  Well, under it should read “In Housing We Trust”.

Kessler’s Forecast:
The real estate market we currently live in will be remembered most for the following statement, “Many who could didn’t”.  They just did not take the leap of faith they needed to, however others are taking that leap of faith.  Last week I wrote about insurance companies and real estate investors who see the big picture.  On top of those mentioned there is a huge consortium of foreign investors investing in our real estate market.

In the end many will make huge profits for having faith now, but I hate to say, the “many” will not be the Americans making the median income this index is based on.

RATES

Kessler’s Take:
The 30 year fixed remained at 3.87% nationally according to Freddie Mac’s Weekly Survey.  Last week I forecasted the rates would increase to 3.93%.  This week upcoming should see 30 year fixed nationally increase to 3.90%.  In the coming month rates should stay around the 4.00% mark.

Kessler’s Forecast:
Last week (2/9/2012) – 3.93%;
1 week (2/16/2012) – 3.90%;
1 month (3/21/2012) – 4.05%;
3 months (5/26/2012) – 4.15%;
6 months (9/3/2012) – 4.25%;
12 months (2/17/2013) – 4.55%

Reports

Previous Week:

Monday, February 6th
Kessler Housing Report
KMG Mortgage Consulting

Upcoming Week:

Thursday,  February 16^th
January Housing Starts
U.S.Census Bureau

According to data provider Preqin a little more than one-fourth of the $50 trillion in assets under management at insurance firms is in real estate.

Kessler’s Take:
Something about this reminds me of Disney’s version of Peter Pan when they sing the song Follow the Leader.  This is a perfect example of why an average investor should not try to reinvent the wheel when a plan is laid out for them.  Believe me when I tell you I am all about being conservative after what we have all experienced over the past decade.  If we go as far back as the tech bubble of the early 2000s to present day we have all witnessed a crazy ride of ups and, unfortunately, many downs.

With that said insurance companies by de facto have to be relatively conservative with the way they manage their money.  Okay, there are exceptions to the rule as three letters come to mind, AIG.  But all in all an insurance company is able to stay in existence by leveraging the premiums they receive into investments so they have the assets when a policy needs to be paid out.

The point I am trying to drive home is what is supposed to be a conservative investment plan includes a considerable amount of real estate.  A well rounded plan should consist of many different vehicles to ensure future growth specifically if one or a couple of the investments turn south. What I see here are insurance companies investing what they can now in real estate because the long term returns will be substantial.

Aren’t we taught from early on to buy low and sell high?  Well, if you have seen a newspaper or turned on your TV in the past few years then you know that now is the low time and sooner rather than later the bargains will be gone.  It is not just the insurance companies that see this as a great opportunity.  According to Campbell/Inside Mortgage Finance investors represented 22.8 percent of home purchases in December.

Wait, it even gets better if you have cash to spend in the real estate market.  According to the same survey conducted by Campbell/Inside Mortgage Finance investors usually offer 10 to 20 percent below listing prices because they are banking on sellers wanting to sell quickly.  There have been plenty of scenarios out there that have created long closing periods for those looking for financing.  While a mortgage can still get done in 30 to 60 days from start to finish, a cash buyer can close tomorrow and for some sellers that is a huge benefit.

The professionals realize it is a great market to buy in as it is only a matter of time until the trickle down effect occurs and the fence sitters realize what a great opportunity it is to buy and then the market reverses with real estate values increasing.  I am not suggesting preying on the downtrodden but there are plenty of banks out there looking to unload their real estate portfolios because they are not in the business of playing landlord.  They want to clear their books and start fresh.

Having an investment plan that includes real estate is a sensible move if nothing else you would be following the leader.

Kessler’s Forecast:
Over the coming couple of years many investment firms are going to suggest to their clients if they do not have real estate holdings to look to invest in the market.  Some will make the move and purchase a primary residence, others might benefit from the luxury of purchasing a second home and those who are the smartest and fortunate enough to have the funds will purchase investment properties to watch their money grow.

RATES

Kessler’s Take:
The 30 year fixed decreased to 3.87% from 3.98% nationally according to Freddie Mac’s Weekly Survey.  Last week I forecasted the rates would increase to 4.01%.  This week upcoming should see 30 year fixed nationally increase to 3.93%.  In the coming month rates should stay around the 4.00% mark.

Kessler’s Forecast:
Last week (2/2/2012) – 4.01%;
1 week (2/9/2012) – 3.93%;
1 month (3/14/2012) – 4.05%;
3 months (5/19/2012) – 4.15%;
6 months (8/26/2012) – 4.25%;
12 months (2/10/2013) – 4.55%

Reports

Previous Week:

Monday, January 30th
Kessler Housing Report
KMG Mortgage Consulting

Tuesday, January 31st
S&P/Case-Shiller Home Price Index Released
Standard & Poor’s Financial Services LLC

Upcoming Week:

None