Archive for March, 2011

Five signs that say BUY…

Home buyers sitting on the fence wondering if now is the right time to buy should consider five factors when making this decision: Jobs, recent sales activity, construction, mortgage availability, and anecdotal evidence. Each of these issues can help consumers make the best choice for their situation and financial circumstance.

Jobs: Although many areas of the country were deeply impacted by the recession, some areas were less affected by job loss. If employment stability is a concern, prospective buyers should review job-growth data from the U.S. Bureau of Labor Statistics at The data provided by the Bureau is approximately one month old and shows the direction of the local economy.

Recent Sales Activity: Housing inventory and sales volume should be taken into consideration while house hunting. A large inventory of homes with few actual transactions can be a negative indicator. On the other hand, if inventory is falling and transactions are rising, that is a good sign. In January, the CALIFORNIA ASSOCIATION OF REALTORS®’ Unsold Inventory Index stood at 6.7 months, up from 5 months in December 2010, but down from 5.7 months in January 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Construction: Staying up-to-date on the number of building permits issued for local builders is useful for gauging builder sentiment and the future of housing activity. The California Building Industry Association recently announced that California homebuilders pulled 2,920 total housing permits in January, registering a 5-percent decline compared with a year ago and a 56-percent decline compared with December. However, the Construction Industry Research Board is projecting 62,000 total permits will be pulled in 2011, an increase of 38 percent compared with 2010’s total of 44,893 permits.

Mortgage Availability: Home buyers hoping to be approved for a mortgage should monitor local lending patterns. Following the financial crisis, most national banks tightened lending standards; however, some local banks haven’t been impacted as much as large lenders and are more willing to lend, even for higher-priced homes.

Anecdotal Evidence: Although buyers can access home listings online, one of the best ways to monitor the local housing market is to work with a REALTOR® and gather intelligence using their expertise and guidance.


The Revised Estate Tax

The tax cuts in 2001 by Bush lowered estate taxes over 10 years. These cuts brought the existing estate tax rate from a high of 55% to 35% over a 10-year period. The 35% estate tax rate was to stay in effect through the end of 2009. Then, estate taxes were set to disappear in 2010 and finally return to pre-tax cut levels at the start of 2011.

Now, there are changes that have taken place for tax years 2011 and 2012. The new law sets the federal estate tax rate at a flat 35%. In addition to this lowered rate, there are additional benefits: The number of people affected by the estate tax are reduced as estates under $5 million are not subject to any taxation. The limit was previously $3.5 million. The $5 million estate tax exemption is now portable, which allows for easier post-death planning. After the death of the first spouse, any unused portion of the spouse’s $5 million exemption may go into the other spouse’s estate. ?The bill now increases the total lifetime exclusion for gift giving to $5 million (previously $1 million), but unifies the estate gift and generation skipping taxes. So, if a taxpayer leaves $4 million to a generation skipping trust for grandchildren at death, then $1 million would be left for exemption. If someone gives away $5,000,000 tax-free during their life, then the entire estate is taxable.

This revision also gives estates of 2010 the choice of whether to use 2010 or 2011 estate tax rules.This is important because even though in 2010 there was no estate tax, there was a change in the capital gains tax of the estate. Prior to 2010, estates got a stepped-up cost basis (value to current market) for any assets in the estate. Thus, a property bought 20 years ago for $100,000 that is worth $500,000 today, would go into the estate as $500,000. But, in 2010, it would go into the estate at $100,000 and the heirs would have to pay a capital gains tax on the difference.

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