Cincinnati Real Estate Blog

There is no delight in watching the budget deficit soar. The $1.4 trillion deficit in the completed 2009 fiscal year to September is the highest ever in the U.S. in sheer dollar figures, and the highest since the Second World War if measured in relation to the overall economic pie. It's a huge burden to the future generation and could easily cause interest rates to rise much sooner and quite sharply. Washington needs to come out with a credible plan to reduce the deficit over time.

However, one area where federal taxpayer dollars have effectively been utilized is in providing a homebuyer tax credit. The key to any future sustainable economic recovery lies in home values stabilizing or, better yet, a return to a historical appreciation rate of 3 to 5 percent each year. The bubble prices crash landed. All the excesses have already been removed. In fact, one could legitimately argue that home values have overshot downward. Price-to-income ratio is now below the historical average. The monthly mortgage payment for a middle income person buying a middle priced home is well below its historical norm.

Meanwhile, price correction and over-correction have wreaked havoc to the broader economy. Wall Street balanced sheets were bleeding heavily (before the major assist from the $700 billion TARP funding), foreclosures spiking, strategic defaults rising among financially capable but underwater homeowners, appraisals becoming messier, and most importantly in terms of economic impact, a bulk of American families have witnessed a major destruction to their wealth accumulation by more than $4 trillion in the past three years. The economy will have a difficult time gaining firm footing without government life support if home values continue to fall. To achieve home value stabilization we need financially healthy individuals to enter the market and buy up homes.

A review of the latest incoming data strongly suggests that the homebuyer tax credit has had its intended impact of significantly stimulating home sales. From about 4.5 million annualized home sales pace in the few months prior to the stimulus, sales have jump to 5.1 million in recent months. That is a change of 600,000 additional existing home sales. New home sales have risen from mid 300,000 to low 400,000 over the similar period. The rise in sales has been concentrated in the lower-priced homes largely because first-time buyers are looking to stay, rightly, well within their budget.

Inventories, though still higher than a desired level, have been trimmed. The latest months' supply of inventory at 8 months is much better than the double-digit figures of last year. Home values have likewise moved in an "improving" direction. Broadly speaking, they are down from one year ago, but the declines have been less steep in recent months compared to the pre-stimulus times. The median existing home price as of August was down 12.5 percent compared to nearly 20 percent fall early in the year. In short, sales have risen and home prices are on the verge of stabilizing. But the housing stimulus package is set to expire. A settlement, and not the contract signing to buy, must occur by the end of November. Some first-time buyers who are a signing contract to buy in October may just make the deadline.

It would be an utter pity if the housing market, just at the cusp of self-sustaining recovery, rolls downhill again. That could indeed happen if potential buyers step back and inventory again climbs. Falling home values - independent of whether overcorrecting is happening or not - will bring back all the associated collateral damage.

A much happier scenario would be that the buying momentum continues for few additional quarters such that inventory falls back down to the normal 5 to 7 months, a level consistent with home value stabilization. Once that is accomplished, the consumer "fear factor" of waiting and waiting for a lower price later down the road will no longer be part of home buying decision. We will have reached a point of housing market self-sustainability. Consumer confidence will be lifted. The wealth impact of consumers opening up their wallets for general consumer goods will steadily turn positive. Thus, the broader economy also gets set for a sustainable recovery without needing further stimulus dollars.

For that happy scenario to play out, a time extension on the home buyer tax credit is critically needed. At a cost of about $10 billion (if extended through the middle of next year), the housing market will likely have recovered nicely with the broader economy on track for a solid robust expansion. The cost of $10 billion is rather modest if compared to the $700 billion in TARP funding and the $800 billion of the broader economic stimulus package that was passed early in the year (with debate still raging over the effectiveness of that broad spending bill). Moreover, the cost of $10 billion is a static measure that does not take into account of job creations and increased tax revenue from rising economic activity. If fully accounted for economic dynamic responses, the home buyer tax credit can be argued as a net positive revenue generator for the federal government. As with all budgets, there is nothing like economic growth that dents budget deficits. If the economy was already in full capacity the housing stimulus would simply be moving dollars from one sector of the economy to the next. But as is fully visible out in the streets, we are nowhere near full capacity. Factory capacity utilization was 69.6 percent in August, compared to 80 percent rate that should be the case in normal economic times. On the job market the country is facing a double-digit unemployment rate rather than the healthy 5 or 6 percent unemployment rate. Therefore, there is a plenty of room for growth for a win-win situation for the housing market and other sectors of the economy.

Despite these vast potential benefits to the economy from extending the homebuyer tax credit, valid questions should nonetheless be asked. Is there any pent-up demand remaining? Will the tax credit just go to the people who would have bought a home anyway and thereby allow them to simply pocket the $8,000 check? Well, the following table presents a compelling case for tapping the financially healthy renter population. In 2000, the year before any boom in the housing market, there were 11.5 million renter households who had the necessary income to buy a median price home at the prevailing market conditions. Today, the pool of renters who can buy a median priced home is over 16 million. Just nudging even a small slice, say 5 percent, of these financially healthy renters into buying, by flashing a tax credit check as incentive, will mean 800,000 additional home sales. That number is sufficiently meaningful to get the inventory down to the level of home value stabilization. The housing market will then be on the path to a self-sustaining recovery. After what we through this decade, it would be quite nice to observe the return of a boring housing market with annual price growth of a steady and normal 3 to 5 percent - without any of the fits, frenzy, and panic.

Oct. 9,2009

By Lawerence Yun, NAR's Chief Economist

Attractive landscaping is one of the best ways to make a good first impression, help increase property value & show that a home is loved.

Though a well-designed landscape can be simple, it also can move far beyond a velvety lawn and colorful flower beds to encompass trees, shrubs, irrigation, and lighting. By making informed choices, home owners can transform their properties, whether they’re selling or just moved in and plan to stay for years.

When budgeting for a landscaping overhaul, home owners should plan to spend about 10 percent of the value of the home. To achieve a grander look, a bigger budget of 15 percent may be necessary.

Here are some simple projects that experts say will make a big impact on the property’s appearance — and possibly boost resale value.

• Plant trees. Trees look nice, cut down on heating and cooling costs, and can even help a home sell for more money, the USDA Forest Service says. Properly placing just three trees can save an average household between $100 and $250 in annual energy bills, according to the U.S. Department of Energy.
• Go for year-round color. Rather than make do with empty beds and a brown lawn in winter, home owners can pick materials that remain green all year. Examples: evergreen arborvitae, junipers, and boxwood.
• Help the environment. There are dozens of ways to be a good environmental steward. A rain garden can retain water rather than send it into the nearest storm sewer. Large shade trees can screen a roof and windows from sun and block cold wind and air.
• Make your yard livable. A yard can be transformed into livable outdoor “rooms.” High on the wish list are outdoor kitchens and fire pits, and the newest star — media rooms.
• Just add water. Everyone loves water’s soothing sound, whether it cascades into a pond, fills a fountain, or churns in a hot tub.
• Build a pergola. A pergola — a set of columns supporting a roof of trelliswork on which climbing plants can grow — adds architectural interest, vertical growing space, and shade.

For Home Owners on a Budget

Landscaping doesn’t have to cost as much as your house. There also are many affordable improvements home owners can make to enhance curb appeal.

• Clear away lawn art, toys and other “clutter.”
• Edge beds and add fresh mulch.
• Paint or seal terraces and replace rotted wood.
• Add a touch of color. A few pots of tulips in March work magic; red and white colors add the most punch.
• Use container gardens. Pots are an affordable, portable way to line a path, embellish an entry, grow herbs, and decorate indoor rooms when weather changes.

Thanks

Julz Brown

Group Realtors

Licensed in Ohio & Kentucky

513.237.1072

Julz@SellingCincinnatiHomes.com

Both can be implemented this year; however, the Ohio program has limited funds, which means those funds could dry up in the next 30 to 60 days. It is administered through the Ohio Housing Finance Agency. Not all lenders are making loans under the program.

The 2009 Recovery Act signed into law early this week has something for everyone. Make sure you take advantage of what is being offered to you. Please consult with your accountant or the IRS for further details & tax implications regarding these new credits.

The first time homebuyer credit that passed in July of 2008 was, thankfully, improved upon. Polls conducted by the National Association of Realtors found that the overwhelming majority of first time buyers (76%) viewed the 2008 credit as a loan and added more to their debt since it had a recapture period. The results were negligible with regards to stimulating sales. Consequently, in the new bill there was an increase in the tax credit and the recapture provision was eliminated as long as the home is not sold in the first 3 years.

• $8000 first time buyer credit
• Valid on primary residence purchases from January 1^st, 2009 to on or before November 30^th, 2009
• Income limits; $150,000 if filing jointly and $75,000 if filing single
• Credit can be claimed on 2008 tax return

As part of the Stabilization Act in October 2008 homeowners received tax credits for energy efficient home improvements. This was once again addressed in the Recovery Act of 2009 with extensions and modifications to tax credits. The credit is for qualified energy efficient improvements & can be captured on your 2009/2010 tax returns for a cap of $1500.

• Storm doors, exterior windows & skylights
• New high-efficiency air conditioners, heat pumps, water heaters, corn fueled stoves, furnaces, boilers & geothermal heat pumps
• Roofing & insulation
• Each improvement comes with its own qualifications and efficiency standard. Please refer to your accountant or the IRS for further information.

It was a shock to many and a pleasant surprise to few when Hamilton County residents received their updated property tax bill in January. Many were left wondering why their property value has increased when all we hear in the news is the decline of real estate values.

In defense of the Hamilton County Auditor’s office it is a very convoluted task to reassess everyone’s value every three years and one way for them to accomplish this task is to do so with mass appraisals. As part of the mass appraisal process general market data is applied. As a result, sometimes properties can be overvalued and some even undervalued.

So what can you do if you feel your property is overvalued?

You have the option to file a complaint with the Hamilton County Board of Revision. The steps are simple and this outline is a brief summary from their web site for 1 to 4 family residences. Please refer to the county for full outline on residential complaints and on commercial property.

• Contact the county auditor or visit their web site for a DTE Form 1
• The owner of record, as of the date of filing, must be the person that files and shows up for the hearing.
• If the property is in a name other than your individual name, as with an LLC, INC. or trustees, you may need to consult with an attorney familiar with the property value complaint process
• All forms must be filled out in its entirety with copies of all evidence to support your claim and MUST BE received in their office by March 31^st, 2009.
• Under Ohio Law THE BURDEN OF PROOF IS ON YOU. You must prove, with the evidence you present, that the value you have requested is the fair market value for the property.
• Once the paperwork is completed and submitted to the appropriate office they will contact you by certified mail no less than 10 days prior to your scheduled hearing.
• After your brief hearing you will receive final results via certified mail.

If you need help with finding supporting evidence or if you are curious to see recent sales data to see if it is something you want to pursue further feel free to call or email me. As with any real estate questions or concerns I am here as a resource and to help in any way I can so please do not hesitate to ask.

For further information on the complaint process and needed forms please call the Auditor’s office at 513.946.4035 or refer to their web site http://www.hamiltoncountyauditor.org/bor.asp

Thanks

Julz Brown

Group Realtors

513.237.1072

Julz@SellingCincinnatiHomes.com

www.SellingCincinnatiHomes.com

In 2007 we sadly saw the end of the home improvement tax credits being offered and I am happy to report that they are back! By now everyone is aware that the “Emergency Economic Stabilization Act of 2008” was signed into law back in October of 2008. This bill will always be known for bailing out the financial markets but it also extends tax credits for energy efficient home improvements (windows, doors, roofs, insulation, HVAC, and non-solar water heaters). Tax credits for these residential products, which had expired in 2007, will now be available again for improvements made during 2009. Items must be “placed in service” January 1, 2009 to December 31^st, 2009. However, improvements made during 2008 are not eligible for a tax credit.

The bill also extended tax credits for solar energy systems and fuel cells to 2016. New tax credits were established for small wind energy systems and plug-in hybrid electric vehicles. Tax credits for builders of new energy efficient homes and tax deductions for owners and designers of energy efficient commercial buildings were also extended.

For a detailed breakdown of the credits please visit http://www.energy.gov/taxbreaks.htm

In addition, for those of you that did not get my report on the Housing and Recovery Act passed in the summer of 2008 there was also a tax credit in that bill that took effect. If you know of anyone that has not bought a house or has not owned a primary residence in more than 3 years they could be eligible for a $7,500 tax credit but must buy prior to June 30, 2009. Now is definitely the time to buy!!!!