Housing Market: Fiscal Cliff Avoided

Hey Everyone,
     The new year is bringing new issues to discuss and one of the more prevalent issues is the temporary avoidance of the "Fiscal Cliff". The fiscal cliff refers to a set of economically damaging tax hikes and spending cuts that were scheduled to become active in 2013. Despite the uncertainty created by potentially falling off the fiscal cliff, the news for the housing market had continued to be generally positive. The NAHB and Wells Fargo Housing Market Index measure of single-family builder confidence rose for the eighth straight month to a level of 47 in November, which was the highest level since April 2006. Although it was good to see the progress of 2012 remain positive and consistent regardless of the pending fiscal cliff, it would have been very bad to actually go over the cliff. As I mentioned in the opening sentence, however, the fiscal cliff was temporarily avoided and that is good news for housing in the short-run. 
     The enactment of H.R. 8, the American Taxpayer Relief Act of 2012, will permanently extend ALMOST all of the 2001/2003 tax cuts. The legislation prevents a fiscal drag of approximately $600 billion in 2013, which would have been substantial enough to push the currently weak economy into recession. In turn, that would have reduced demand for both owner-occupied and renter housing as well as threatening the ongoing recovery for home building. Luckily, that outcome has been prevented, but 2013 may be a year in which comprehensive tax reform is under legislative consideration.
    Although there are some issues to be further discussed by our government, lets take a look at a few of the Real Estate benefits resulting from the fiscal cliff avoidance. H.R. 8 permanently extends income tax rates paid by those with less than $450,000 in adjusted gross income ($400,000 if single), this includes the rates paid for capital gains and dividend income. Since a large amount of home builders are organized as pass through entities they pay their business income taxes on individual income tax forms.  This will help keep home builders active which is important as home builders are crucial to the continuing recovery of the housing market. The new law also sets permanent rules for the estate tax, the AMT patch and other elements of the 2001/2003 tax cuts. 
     As I stated in the beginning of the post, the temporary avoidance helps Real Estate in the short-run. The long-run is still to be determined due to a few negative results from H.R. 8. One of the more significant negative results is that the law reinstates the Pease itemized deduction phase-out. This will slightly reduce the value of itemized deductions; for example, charitable giving and mortgage interest. The reinstatement of the Pease rule implies that policymakers are considering itemized deductions, such as the mortgage interest deduction, as a possible revenue increase in future fiscal debates. Those conversations, or debates, will be held in February in which the debt ceiling will need to be raised and the sequester on government spending (delayed by American Taxpayer Relief Act of 2012) will need to be addressed. The year of 2013 may possibly be defined by a collection of "mini-cliffs" in which home buyers and builders will be affected in some way.

Stay Real ~ Celebrity Homes

This Celebrity home is owned by the infamous John Travolta. This Florida mansion seems to portray a mini-airport from an aerial view, mainly because of Travolta's private Boeing 707B. The driveway was designed especially for the purpose of being able to taxi his aircrafts right up to the house.

Stay Real~Celebrity Homes

I'm starting a new segment on my blog called Stay Real Celebrity Homes. I'll show you a different celebrities home with each post and give you an eye into Celebrity Real Estate!

This is the Estate of Brad Pitt and Angelina Jolie. It is a 1,000 Acre Estate Located in the South of France and is valued at approximately £53 Million! Some of the Amenities include multiple indoor and outdoor gyms, a moat fed by streams running through hidden tunnels, and the property is surrounded by secluded forests.

Real Estate 2013: What To Expect

Happy New Year to Everyone!!!!!

     New year, new market! Let's take a look at what experts are predicting for the new year and how that will affect your future. There have been consistent and steady gains throughout 2012 and experts are expecting that momentum to continue into the new year. The Wall Street Journal touched upon a few points they believe to be important issues in the Real Estate industry for 2013. The first issue to discuss is market inventory. As I had mentioned in a few of my previous posts in 2012, the inventory in most markets has been fairly low. Buyer demand, however, has been increasing and growing very strong as of late. In order to meet the increasing demand, home builders are increasing their production and with the increase in home prices, home owners are expected to feel more comfortable listing their homes. More new homes along with more favorable market conditions in the eyes of the sellers will hopefully mean a greater inventory of houses on the market. 

     Another aspect to look at in the Real Estate market is the effect of the rising home prices on buyer and sellers. As I mentioned above, the rising home prices will help the sellers feel more confident and open to the idea of selling their home because one of the main reasons that home owners were holding off on selling was avoiding a huge loss. What does this mean for the buyer? Well, consistently increasing home prices will lead to a greater urgency for home ownership for a few reasons. Rising home prices results in higher rent prices which makes renting not as ideal as it was the past few years. Mortgage rates are still at record lows which creates a great opportunity for home ownership. If there were potential buyers awaiting the market to bottom out before they decided to buy...well...it did bottom out and the consistent rising of prices shows a strong recovery. All of these conditions make it more urgent for buyers to buy sooner rather than later.

     Another issue that has been haunting the Real Estate recovery has been the issue with credit. Although the mortgage rates are very low, obtaining a mortgage has not been a walk in the park, and that does not seem to be getting any better in the near future. Many issues with regulations and lending practices have to be thought over and re-mediated in order to create a better environment for lending. Lastly, the two major issues related to the Real Estate recovery are unemployment and statue of the Economy. If unemployment decreases and the economy can get going again, we will see most of the issues hindering the recovery disappear. However, if the economy takes a down turn and unemployment increases then the Real Estate recovery will likely slow or even stop. I will keep you updated on these important issues as the year progresses. So what does 2013 have in store for Real Estate? Without my crystal ball I can't really answer that question yet, but I can tell you two things that I see for 2013... Promise and Potential!