Clearwater Beach Condos Archives

Home Equity: You May Have More Than You Think

CoreLogic recently released their 2015 2nd Quarter Equity Report which revealed that 759,000 properties had regained equity in the last quarter. That means that 91% of all mortgaged properties (approximately 45.9 million) are now in a positive equity position. Anand Nallathambi, president and CEO of CoreLogic, reported:

“For much of the country, the negative equity epidemic is lifting. The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets.”

Obviously, this is great news for the financial situation of many homeowners.

But, do they realize their equity position has changed?

A recent study by Fannie Mae suggests that many homeowners are unaware that their equity position has changed…in some cases dramatically. For example, their study showed that 23% of Americans still believe their home is in a negative equity position when, in actuality, only 9% of homes are in that position.

The study also revealed that, though 69% of homes had “significant equity” (greater than 20%), only 37% of Americans realize it.

This means that 32% of Americans with a mortgage fail to realize the opportune situation they are in. With a sizeable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing).

Fannie Mae spoke out on this issue in their report:

“Homeowners who underestimate their homes’ values not only underestimate their home equity, they also likely underestimate 1) how large a down payment they could make with their home equity, 2) their chances of qualifying for mortgages, and, therefore, 3) their opportunities for selling their current homes and for buying different homes.”

Bottom Line

Every homeowner should be aware of the true equity in their house and also realize the opportunities that go along with it. If you are unsure of the savings you currently have built up in your home, contact a real estate professional to help ascertain that number. You may be surprised.

Keeping Current Matters 10/2015

Tax Planning for Owning a Second Home

Benefits of Owning a Second Home

Learn how mortgage interest, property taxes, rental property and tax-free profit affect your tax return.

If you are considering owning a second home, congratulations! Not only can you look forward to having a place to relax, you also can garner some tax benefits for that place at the beach.

You can use several tax breaks:

Mortgage Interest

If you use the place as a second home — rather than renting it out as a business property — interest on the mortgage is tax deductible just as interest on the mortgage on your first home is. You can write off 100% of the interest you pay on up to $1.1 million of debt secured by your first and second homes that was used to acquire or improve the properties. (That’s a total of $1.1 million of debt, not $1.1 million on each home.) The rules that apply if you rent the place out are discussed later.

Property taxes. You can deduct property taxes on your second home, too. In fact, unlike the mortgage interest rule, you can deduct property taxes paid on any number of homes you own.

If You Rent the Home

Lots of second-home buyers rent their property part of the year to get others to help pay the bills. Very different tax rules apply depending on the breakdown between personal and rental use. If you rent the place out for 14 or fewer days during the year, you can pocket the cash tax-free. Even if you’re charging $10,000 a week, the IRS doesn’t want to hear about it. The house is considered a personal residence, so you deduct mortgage interest and property taxes just as you do for your principal home.

Rent for more than 14 days, though, and you must report all rental income. You also get to deduct rental expenses, and that gets complicated because you need to allocate costs between the time the property is used for personal purposes and the time it is rented.

If you and your family use a beach house for 30 days during the year and it’s rented for 120 days, 80% (120 divided by 150) of your mortgage interest and property taxes, insurance premiums, utilities and other costs would be rental expenses. The entire amount you pay a property manager would be deductible, too. And you could claim depreciation deductions based on 80% of the value of the house. If a house is worth $200,000 (not counting the value of the land) and you’re depreciating 80%, a full year’s depreciation deduction would be $5,800. You can always deduct expenses up to the level of rental income you report.

But what if costs exceed what you take in? Whether a loss can shelter other income depends on two things: how much you use the property yourself and how high your income is.

If you use the place more than 14 days, or more than 10% of the number of days it is rented — whichever is more — it is considered a personal residence and the loss can’t be deducted. (But because it is a personal residence, the interest that doesn’t count as a rental expense — 20% in our example — can be deducted as a personal expense.)

If you limit personal use to 14 days or 10%, the vacation home is considered a business and up to $25,000 in losses might be deductible each year. That’s why lots of vacation homeowners hold down leisure use and spend lots of time “maintaining” the property. Fix-up days don’t count as personal use. The tax savings from the loss (up to $7,000 a year if you’re in the 28% tax bracket) help pay for the vacation home. Unfortunately, holding down personal use means forfeiting the write-off for the portion of mortgage interest that fails to qualify as either a rental or personal-residence expense.

We say such losses might be deductible because real estate losses are considered “passive losses” by the tax law. And, passive losses are generally not deductible. But, there’s an exception that might protect you. If your adjusted gross income (AGI) is less than $100,000, up to $25,000 of such losses can be deducted each year to offset income such as your salary. (AGI is basically income before subtracting your exemptions and deductions.) As income rises between $100,000 and $150,000, however, that $25,000 allowance disappears. Passive losses you can’t deduct can be stored up and used to offset taxable profit when you ultimately sell the vacation house.

Tax-Free Profit

Although the rule that allows home owners to take up to $500,000 of profit tax-free applies only to your principal residence, there is a way to extend the break to your second home: make it your principal residence before you sell. That’s not as wacky as it might sound. Nor is it as lucrative as it used to be.

Some retirees, for example, are selling the big family home and moving full time into what had been their vacation home. Before 2009, this had a very special tax appeal. Once you live in that home for two years, up to $500,000 of profit could be tax free — including appreciation in value during the years it was your second home. (Any profit attributable to depreciation while you rented the place, though, would be taxable. Depreciation reduces your tax basis in the property and therefore increases profit dollar for dollar.)

A few years ago, though, Congress cracked down on this break for taxpayers who covert a second home to a principal residence. A portion of the gain on a subsequent sale of the home is ineligible for the home-sale exclusion of up to $500,000, even if the seller meets the two-year ownership and use tests. The portion of the profit that’s subject to tax is based on the ratio of the time after 2008 when the house was a second home or a rental unit to the total time you owned it.

This can still be a great deal if you’ve owned your second home for many years before the law changed. Let’s say you have owned a vacation home for 18 years and make it your main residence in 2014. Two years later, you sell the place. Since the five years after 2008 the place was your second home (2009 through 2013) is 25% of the 20 years you owned the home, only 20% of the gain is taxed. The rest qualifies for the exclusion of up to $500,000.

Information obtained from Kiplinger.com

This information is for general guidance. The application and impact of laws can vary widely based on the specific facts involved. Accordingly, the information on this Site is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers.

Southwest Florida Buyers Paying Cash

Home buyers in Southwest Florida are still paying with cash at one of the fastest rates in the nation.

Of the 10 metro areas with the highest share of cash purchases in the first quarter, more than half were in Florida, according to real estate analyst Zillow.

Southwest Florida Buyers Paying Cash
“In Florida, cash is king,” Zillow said. ” At the end of the first quarter, seven of the top 10 metros with the highest share of home purchases made in cash were in Florida, up from six at the end of 2014.”

All 10 of the U.S. metro areas with the highest share of cash buyers were east of the Mississippi River, while cash buyers were less common in the western U.S.

“Homes in many eastern markets are generally less expensive than in their western counterparts, which can be conducive to more cash purchases,” Zillow said. “Cash purchases are also more likely to be made by investors and institutional buyers looking to buy many less-expensive homes all at once to convert into rental housing and/or flip as the market improves.”

In addition, the analyst noted, Florida’s judicial foreclosure process can be slow, extending the period when investors are buying discounted homes from lenders as they clear foreclosure.

Florida posted the second-highest share of cash sales in June, at 45.8 percent, behind only New York’s 47 percent, CoreLogic said.

The U.S. rate was 31.3 percent, down from 34 percent over the year.

“The cash sales share peaked in January 2011, when cash transactions made up 46.5 percent of total home sales nationally,” CoreLogic said. “Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25 percent. If the cash sales share continues to fall at the same rate it did in June 2015, the share should hit 25 percent by mid-2017.”

Jim Quinn, president of the Port Charlotte-North Port-Punta Gorda Association of Realtors, said cash sales have “consistently” accounted for less than 50 percent of activity this year, with distressed properties representing a smaller segment of sales.

“I would say both of these trends are indicative that more of the buyers are purchasing for personal use as opposed to investment,” he said.

No-financing sales accounted for 43 percent of home deals throughout Florida in August, while the U.S. average was 24.5 percent.

Herald Tribune 10/5/2015

Pinellas County Real Estate Statistics for August 2015

After several months of record sales and a blistering seller’s market, statistics in many areas have cooled significantly.

Average sale price for a single family home was $234,647 in August 2015, down 2.8% from last August.
The average sale price for townhome/condo was $187,683, down 1% from $189,528 a year ago.
The number of cash sales is the lowest since January, at 833 for single family and townhome/condo combined. Median sales price for single family was $181,399, a 6.7% increase over last August.
For the townhome/condo segment, median sales price was $135,500, up 13% over a year ago.
Median days on market was also a bright spot, at 47 for single family (down 13% from last August), and 65 for townhome/condo (down 11% from last August).
Inventory is even lower than last month, dropping from 3.9 months to 3.6 months supply.

August 2015 active listings for single family and town home/condo combined were 6,742, the lowest since January 2013, when the count was 6,169. New listings are the lowest they have been since December 2014, at 2,239 versus 1,887 last December.

The lack of inventory continues to be a huge part of the Pinellas County real estate story. The total sold units for single family and townhome/condo combined in August 2015 was 1,888, down significantly from the 2,123 sold in July 2015. In fact, this is the lowest number of sold units since February.

Year-over-year closed sale stats for single family and townhome/condo combined were 12.4% higher this August than a year ago, but almost 50% lower when compared with the 24.2% increase for July 2015 over July 2014.

With the Consumer Financial Protection Bureau’s (CFPB) new loan estimate and closing disclosure rules taking effect October 3, we will be watching closely to see how it impacts the market, particularly the number of closed sales.

Pinellas – Clearwater Real Estate Report July 2015

July 2015 Statistics

While the number of closed home sales continues to rise, the market may not be a rosy as it appears. On one hand, sellers have it made, with “rising home prices, demand from home buyers, and less competition making 2015 a stellar year to sell for many U.S. home owners across the country,” According to Daren Blomquist, RealtyTrac’s vice president.(1)

However, “signs are emerging that housing’s momentum may be destined to falter in coming months. Analysts note that some of the key foundations needed to sustain a brisk pace of home buying in the long run appear to be missing. The main problem is the simplest: There just aren’t enough homes available. Robust demand has failed to draw many sellers into the market. And few in the industry foresee a flurry of home listings arriving soon.”(2)

In Pinellas County, all of this holds true.

Inventory was down 3.3% from July 2014, sitting at 6,953 combined for single family and townhome/condo. This represents a 3.7 month supply for single family and a 4.0 month supply for townhome/condo.
In June there were 7,211 combined active listings, or inventory. Absorption rates have been building steadily all year, but are starting to trend downward slightly, at 40.7% for single family and 30.6% for townhome/condo.
The total sold units for single family and townhome/condo combined in July 2015 was 2,123, down slightly from the 2,192 sold in June 2015.

Sales dipped a bit in May 2015, but for July have again surpassed the ten-year-high record set this April, at 2,103. Year-over-year stats for closed single family and townhome/condo combined sales are maintaining at a 24.2% increase for June 2015 over June 2014, as compared to the 26.2% increase year-over-year from June 2014 to June 2015.

Representing more than 6,000 members, the PINELLAS REALTOR® ORGANIZATION is one of the Tampa Bay area’s largest professional trade associations. The organization advances and promotes the real estate profession through professional development programs, government affairs, and political advocacy and maintains a high standard of conduct by real estate professionals through professional standards training and administration.

(1) Source: Realtor Magazine, “3 Reasons Why It’s a Great Time for Sellers,” (July 24, 2015) via “2015 Great Year to Sell,” RealtyTrac (July 22, 2015)

(2) Source: “Can Housing’s Comeback Endure? The Outlook Dimmer,” The Associated Press, Josh Boak, AP economics writer (Washington), via Florida Realtors (July 27, 2015)

Retirees Choosing to Up-size Homes

Up-size Homes

The new retirement choice

Americans traditionally chose to downsize in retirement, but that may no longer be true. A wave of today’s retirees decide to up-size and enjoy the best home of their lives in retirement, according to a recent Merrill Lynch and Age Wave retirement study of more than 3,600 respondents.

In fact, 65 percent of retirees recently surveyed say they’re currently living in the best home of their lives.

Within the next decade, the number of age 65-plus households in the U.S. is expected to bloom by nearly 11 million.

As more Americans move into retirement, they’re also looking to move into a new home. The study found that 64 percent of retirees are likely to move at least once during retirement. For retirees who do move, only half have downsized, and many are moving into larger homes, according to the study.

The study showed that 49 percent of retirees didn’t downsize in their last move, and 30 percent ended up moving into larger homes. Retirees’ top reason for up-sizing was a desire for a home large and comfortable enough for family members to visit (33 percent) or even live with them (20 percent). One out of six retirees – 16 percent – said they have a “boomerang” child who moved back in with them.

Nineteen percent of retirees also said they up-sized in retirement in order to have a more prestigious home and 16 percent say they wanted a larger home to have more room for friends to visit, according to the study.

The upscale homes in Florida have two downstairs master suites separated by sound proof walls. Whatever the amenities — whether increased space or quiet accommodations — retirees are increasingly willing to pull out all the stops for their relatives’ comfort and multi-generational living.

For those retirees who did downsize, the majority said their top reasons for choosing a smaller home was to have greater freedom from financial and maintenance burdens.

FloridaRealtors.org August 2015

Getting a Large Home Loan Just Got a Little Easier

Large Home Loans

Chase Bank is easing the lending requirements for its large home loan programs — jumbo mortgages, which tend to be loans in excess of $417,000 in many markets and $625,500 in more expensive areas.

A potential buyer now only needs a credit score of 680 and a 15% down payment to qualify for a maximum loan amount of $3 million for a primary-residence home. Borrowers used to need a 740 score and put 20% down.

By easing its standards, the bank is hoping to gain more customers. “The performance we had on jumbo loans … has been fantastic. We think we are able to make high-quality loans to high-quality customers,” said Steve Hemperly, head of mortgage origination at JPMorgan Chase & Co.

The standards for second-home purchases requiring a jumbo loan have also eased to a 680 credit score and a 20% down payment. Buyers used to have to put down 30% to 50%.
The bank claims it’s the only lender allowing a 680 credit score with smaller down payments for primary and second home jumbo mortgages.

Loose lending practices helped bring down the housing market in 2008. In the wake of the Great Recession, credit markets froze and the mortgage industry upped their loan requirements.

While the standards have started to loosen, mortgage availability remains relatively tight and first-time buyers have been noticeably absent.

However, jumbo loans have performed well in the recovery. Hemperly said there’s been an increase in these large loans in California, the Northeast and Chicago.

Mortgages at a Glance

It is getting easier for some buyers to land a house with less money up front.

More lenders are lowering down-payment requirements, allowing borrowers to commit 3%—or even less—of a home’s purchase price to get a mortgage. Many had been requiring down payments of at least 20% since the recession began.

Some lenders also are waiving mortgage-related fees, and more are allowing down payments to be made by other parties, such as the borrower’s family.

The deals are aimed at buyers with good credit scores and a steady income who have been unable to save enough for a sizable down payment. They are often targeted at buyers who live in expensive housing markets, where even a small down payment can equal tens of thousands of dollars.

The WallStreet Journal & CNNMoney.com August 2015

Vacation Home Market Booming

MIAMI – The industry is booming as well-to-do people take advantage of gains in their stock-market portfolios, vacation-home experts said at the National Association of Real Estate Editors spring conference.

Numbers compiled by HomeAway, an online marketplace that links vacation-home owners with would-be renters, tell part of the story. Vacation home sales were up 57 percent in 2014 from 2013, surging to their highest level since 2003, according to survey results.

“We have not seen it as hot for new vacation-home developments in years as it is right now,” said panelist Phillip Day of IMI in Greenville, South Carolina. He said the market has an international aspect, as Europeans and South Americans, always looking for a safe haven for their money, are buying vacation homes in the Caribbean for the rental income.

Developers are even helping the buyers get passports, he said.

In Florida, Miami has the nation’s largest traveler demand for vacation rentals, with Fort Myers Beach at No. 7.

“The overall health of the rental market is very, very strong,” Gray said. “Two trends are accelerating: People are buying homes with the intent to rent them from the beginning. Ninety percent of people who are buying vacation homes — and we are seeing the highest numbers of vacation homes we have seen in a long time — plan to rent in the first year. That is great for the vacation-home market.”

It also is good for the vacation-home owner, because it does not take many weeks of rentals to put a serious dent in the annual carrying cost of a vacation property, Gray said. The average second home, when rented, generates $28,000 per year for the owners.

‘A pretty good time to buy’

The average vacation home costs about $150,000 a year, he said, which is below what it was when the market crashed in 2008.

“So, historically speaking, it is still a pretty good time to buy, in most people’s opinion — 85 percent of vacation-home buyers believe it is a good time to buy. Of course, that is a biased sample. But it creates an opportunity for people to buy into a home they might want to retire in down the road.”

The increase in listings indicates that more people are investing in vacation homes. “Although some wealthy second-home buyers don’t rent them out, Gray said, it actually is better to have people in the house rather than have it sit vacant most of the year.”

“If you had a second home and stayed in it six weeks a year, and it is sitting unoccupied for 46 weeks a year, that is not good for the home,” he said. “If people are staying in it and a cleaning crew is coming in after every stay, the home is in a better state of repair than it would be if you just left it there.”

Author and vacation-home investor Chris Cain, who is writing his third book on the subject, said the industry is picking up after “toddling along” since the bust.

Cain called vacation homes “America’s hidden treasure,” because the industry has provided millions of jobs in property management and maintenance. Most vacation home rentals are handled by management companies to reduce the hassle for owner-investors.

And they are not all rich. The median income of a vacation-home buyer in 2014 was $87,000, according to the panelists.

“More supply means more people are finding what they need in a vacation home,” Gray said. “About 84 percent of those people loved their stay and want to come back the next time. It creates a cycle where they tell their friends, and it makes the investment category more mainstream.”

Herald Tribune 6/25/2015

Sales Up as Inventory Shrinks

Prices Rise as Inventory Shrinks

Rising prices and shrinking inventory couldn’t cool home sales in Southwest Florida last month.

Sales up 20 percent statewide

Statewide, sales of existing single-family homes increased 20 percent to a total of 27,729.
The median sale price was $203,500, a 10 percent increase.
Condo sales totaled 10,991, a 15 percent gain for the year.
Condos traded for a median $152,076, up 8 percent.

“With the continued growth in both sales and prices in Florida, it raises the question of whether the market is starting to overheat,” said Florida Realtors chief economist John Tuccillo. “The decline in inventories to seller-market levels, and the decline in days on market, tend to suggest that possibility as well.”

But he cites mitigating factors: much of the inventory pressure is in the lowest-price tiers, and the rise in condo sales and prices will be eased by an increased supply of newly built towers coming on the market.

“And finally, the Federal Reserve will soon be raising interest rates, which will have a dampening effect on demand,” Tuccillo said.

Inventory in Florida now stands at 4.6 months for homes and 5.5 months for condos.

Nationwide, Americans bought homes in June at the fastest rate in over eight years, pushing prices to record highs as buyer demand has eclipsed the availability of houses on the market.

The National Association of Realtors reported sales of existing homes climbed 3.2 percent to a seasonally adjusted annual rate of 5.49 million, the highest rate since February 2007. Sales have jumped 9.6 percent over the past 12 months, while the number of listings has risen just 0.4 percent.

The median home price has climbed 6.5 percent over the past 12 months to $236,400, the highest level — unadjusted for inflation — reported by the Realtors.

Home-buying has recently surged as more buyers have flooded into the real estate market. Robust hiring over the past 21 months and an economic recovery now in its sixth year have enabled more Americans to set aside money for a down payment. But the rising demand has failed to draw more sellers into the market, limiting the availability of homes and sparking higher prices that could cap sales growth in the coming months.

“The recent pace can’t be sustained, but it points clearly to upside potential,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Nationally, a 5 months’ supply of homes was on the market in June, compared with 5.5 months a year ago.

Herald Tribune 7/24/2015

Pinellas County Real Estate Statistics for May 2015

Pinellas Real Estate Report

After several months of climbing, Pinellas County home sales have leveled out a bit. Partnered with the recent slight increase in interest rates and decreasing inventory, that’s enough to burst anyone’s bubble talk.

Lawrence Yun, chief economist for the National Association of REALTORS®, says that prices have risen quickly but he also isn’t alarmed about a housing bubble. However, he is concerned that housing affordability will continue to soften.

While some housing markets – like San Francisco and Denver – have surpassed their previous 2006 peaks in home prices, economists still aren’t concerned. They say that’s a sign of a normal housing market “because in a bubble prices typically rise in tandem across the country, rather than responding to the strength of local economies,” reports The Wall Street Journal.

The total sold units for single family and townhome/condo combined in May 2015 was 2,029, slightly lower than the 2,103 sold in April 2015. Year-over-year stats for closed single family and townhome/condo combined sales showed a 10.0% increase for May 2015 over May 2014, as compared to the 19.8% increase year-over-year from April 2014 to April 2015.

FLORIDA Realtors® June 2015

All Real Estate is Local

It’s important to work with a Realtor® when looking for the very best Clearwater Beach Waterfront Lifestyle information. For strategies on buying the right Clearwater Beach property for you, or superior service in selling your Clearwater Beach home, contact Maria 727. 798.3209 – email.