May 3, 2012
Buying Is Cheaper than Renting!!!
Taken from: baltimorehomemarkets.com
Buying is more affordable than renting in 98 out of the nation's 100 largest metropolitan areas — even in New York, Los Angeles and Boston, according to real estate company Trulia's rent vs. buy index.
The index is based on asking prices for rental units and homes for sale on the company's website between Dec. 1, 2011, and Feb. 29.
“As rents rise and prices stagnate, homeownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face.”
Homeowners are choosing, or being forced, to rent rather than buy even though the latter is cheaper in key markets Trulia reviewed.
But as they turn to renting, the influx of demand squeezes the nation's rental supply, pushing monthly rents higher.
The nation's median rent stands at $712 per month — well above the average monthly mortgage cost of $647, Paul Dales, senior economist at Capital Economics, recently found. He estimated decreased vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013, compared to 2.4% in January.
As a consequence of less willingness and ability to buy a home, households in rentals will rise by at least 850,000 a year over the next few years, Dales said.
He expects rents to rise at an annual rate of 3% this year and remain at that level in 2013. "Assuming that the economic recovery gains firmer footing, in future years there is scope for rents to rise by around 4% a year," Dales said.
Only in Honolulu and San Francisco is renting often a better deal than buying. However, Trulia points out that buying a home in these markets might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction.
“Metros where homeownership is expensive tend to have stronger long-term economic growth and little room to build new homes, like Boston and the San Francisco Bay Area, where people expect home prices to increase over time," Kolko says.
"Buying is much cheaper than renting in slow-growing places with high vacancy rates and land to spare, like Detroit and Cleveland, where prices are unlikely to improve much in the future," he says.
Multigenerational Homes Are Becoming More Prominent
Taken from: realestate.aol.com
LOS ANGELES -- It's a home within a home -- and it could be coming soon to a home near you.
Builders across the country are revamping home designs to meet the needs of a growing number of Americans who are now living with extended family.
The number of so-called multigenerational households -- where adults are living with their elderly parents or grown children -- has jumped since the Great Recession forced Americans to rethink living on their own. Demographic experts say it's poised to rise further as baby boomers age, so-called "boomerang kids" walloped by the weak job market stay home longer, and ethnic groups such as Asians and Hispanics, who are more likely to live with extended family, continue to grow.
The housing industry is trying to keep up with the changes by adding self-contained suites to single-family homes from North Carolina to California, to enable families to stay close while retaining a greater degree of independence.
Gallery: Multigenerational Homes
"It's not the nuclear family, the American dream family that we see all the time," said Jerry Messman, a partner in national design firm BSB Design. "The builders are starting to respond to it."
After World War II, Americans were encouraged to move out of their parents' house when they reached adulthood and achieve independence at an earlier age. Over the next few decades, young families ventured out to live on their own, separately from their parents, in traditional single-family homes.
Since 1980, however, the number of families living in multigenerational households has steadily climbed, buoyed by a wave of immigration and delayed marriages. After the onset of the Great Recession, the number jumped even higher -- rising 10.5 percent in a two-year period so that nearly 17 percent of Americans lived in multigenerational households by 2009, according to a report by the Pew Research Center.
Home Design Adapts
During the last year, builders and home designers have started to respond to the trend by rolling out layouts for single-family houses that include a semi-independent suite with a separate entry, bathroom and kitchenette. Some suites even include their own laundry areas and outdoor patios for additional privacy, though they maintain a connection to the main house through an inside door.
Reanna Cox, 33, bought a new home earlier this year in San Bernardino with a suite that connects to her kitchen through a hallway. Initially, Cox and her husband planned to have his aging parents live there. But when her sister lost her job, Cox invited her to move into the suite with her young daughter.
"It's somewhere they can live to get themselves back on their feet," said Cox, who moved to the tan, five-bedroom house with caramel-colored shutters to shorten her daily commute.
Lennar Corp., based in Miami, is offering 3,400-square-foot homes in Las Vegas that include a roughly 700-square-foot suite. Standard Pacific Homes of Irvine is offering a self-contained "casita" attached to the main house as an option on its new designs.
Both companies say the plans have been popular since they were rolled out last year.
But it isn't clear what share of homebuyers will buy these homes -- especially since immigrant families from Asia and Latin America who have traditionally lived together have long found ways to do so without this option, said Gary Painter, research director at the University of Southern California's Lusk Center for Real Estate.
"There certainly is a demand to be close," Painter said. "We just don't have enough in the market to make a definitive statement about whether this sort of kitchenette living or guesthouse nearby will become a next wave."
But in higher-end markets, Painter said it's more likely that such plans could prosper, including among well-to-do immigrant families.
'Next Gen' Housing
New-home sales have struggled as builders face competition from foreclosures and short sales. While sales of previously occupied homes have risen more than 13 percent since July, U.S. sales of new homes fell in February for the second straight month and remain well below levels that economists consider healthy.
Lennar is offering its so-called "Next Gen" designs in states ranging from California to Texas to Florida. Sales of these multigenerational homes account for a very small percentage of the company's sales but are growing quickly, said Jeff Roos, Lennar's western regional president.
Multigenerational homes are expected to account for roughly 30 to 40 percent of new homes in communities where the floor plans are being offered, Roos said.
The Aliso Viejo, Calif.-based New Home Company is rolling out a range of options for multi-generational living in the affluent Orange County city of Irvine, where the Asian population has nearly doubled in the last decade.
The company's floor plans include a self-contained suite attached to a main house or separate homes that share a common yard and pool. The company has reached out to Asian buyers by offering touches, such as specially designed wok kitchens and dedicated music rooms, but the homes are also drawing buyers from other ethnic backgrounds, said Joan Marcus-Colvin, the company's vice president of sales, marketing and design.
"Although extremely popular within the Asian culture, (multigenerational living) is also something a lot of other people are having to deal with," she said.
Jim Park, vice chair of the Asian Real Estate Association of America, said he thinks multigenerational designs are a smart move, especially in light of Asian Americans' preference for new construction and the community's rising purchasing power.
"In my experience, people do move toward home products that are going to meet their needs better," said Park, who owns a real estate firm in San Diego.
Builders say the tendency to live together longer comes down to a matter of economics, as families of varied ethnic backgrounds cope with the wake of the recession and the needs of aging parents, who may have seen their retirement savings depleted in the downturn.
"We see so many families that are living like this," said Jeremy Parness, Lennar's division president in Las Vegas. "There's so many different reasons, all driven mostly by economics."
May 2, 2012
What You Can and Can't Deduct When You Work from Home
Taken from: livebaltimorecity.com
Working from home can offer many advantages including tax deductions. Just take care what you try to write off for your home office on your return.
If you work from home, even on a part-time basis, you can probably save a few dollars come tax time. That's because you can write off as a business expense part of the cost of owning and operating your home. Everything from electric bills to property taxes may be fair game.
Those tax deductions can add up, thus lowering your taxable income and reducing the amount you owe Uncle Sam. Before you start spending that refund, however, there are a few rules you need to understand and heed. It's a good idea to consult a tax adviser to be sure that you're filing the right schedules and maximizing your deductions.
Passing the IRS litmus test
To meet IRS guidelines, your home office must be your principal place of business, or the place you see clients in the normal course of business. Parts of your home you use to store products or equipment for your business also count. That doesn't mean that all your work has to be done from home. If you're an outside salesperson, you probably spend most of your work time elsewhere. But if you do you billing and return customer calls primarily from your home, your home office should qualify.
You can also qualify for the deduction if your employer requires you to work from home, as long as you don't charge your employer rent. One big catch is that you must maintain the at-home office for your employer's convenience, not your own, such as to complete reports at night or on weekends. Self-employed workers use IRS Form 8829 to calculate the deduction, which they list on Schedule C.
Measuring your home office
The amount you can deduct for your home office depends on the percentage of your home used for business. Your work space doesn't need to be a separate room-a table in a corner qualifies. But it has to be an area that's used solely for business. The tax break also covers separate structures on your property, like a detached garage you've converted to an office. Unlike an office inside your home, a separate structure doesn't have to be your main place of business to qualify for a deduction. That's because the IRS believes your family is less likely to use a separate structure as a part-time play area or den, says Mark Luscombe, principal analyst for tax and consulting at CCH.
To calculate what percentage of your house the home office occupies, divide your home office's square footage by the total square footage of your home. If your home is 3,000 square feet and your office is 150 square feet, for example, you'd use 5% to calculate your deductions. Not sure how big your house is? Check the documents you received when you bought your home-there's probably a detailed rendering-or measure the outside of your home and multiply length times width.
What can you deduct?
Once you've figured out what percentage of your home you use for business, you can apply that percentage to different home expenses. These include:
•Mortgage interest
•Real estate taxes
•Utilities (heating, cooling, lights)
•Home repairs and maintenance (painting, cleaning service)
•Home owners insurance premiums
Just take each expense and multiply it by your home office percentage (the 5% mentioned above). That's the amount you can deduct as a business expense. So if you spend $150 a month on electricity, you can deduct $7.50 as a business expense. That adds up to a $90 deduction per tax year.
Save bills or cancelled checks to prove what you spent in case of an IRS audit. Take an hour a week to file them away. Also, only repairs can be expensed; improvements must be depreciated.
Don't forget depreciation
Depreciation is based on the idea that everything-even something like a home-wears out eventually. To figure home office depreciation, start by calculating the tax basis of your home: generally the purchase price plus the cost of improvements, minus the value of the land it sits on. Next, multiply the tax basis by the percentage of your home used for work. This gives you the tax basis for your home office.
Usually, depreciation deductions for a home office are figured over a 39-year period. There are caveats. For a crash course, read IRS Publication 946 or talk to a tax pro.
Keep in mind that depreciation deductions on your home office increase the amount of profit on a home sale that is subject to taxes. There's an exclusion of $250,000 of profit if you're a single filer, $500,000 for joint filers. Consult with a qualified tax professional on how depreciation deductions affect your tax liability when you sell.
This article provides general information about tax laws and consequences, but shouldn't be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.
Real Estate Professionals Optimistic About Home Values
Taken from: realestate.aol.com
With signs that a real estate recovery may be kicking into gear, a new survey shows a sharp increase in optimism among real estate professionals about the direction of home values.
A survey conducted by home valuation website HomeGain found that the number of real estate professionals who expect home values to increase has more than doubled over just one quarter. Thirty-seven percent of respondents surveyed so far in 2012 said they anticipate that home values will rise in the next six months, up from 15 percent in the fourth quarter of 2011.
"The trend has been stay the same or decrease. And here it flipped for the first time," HomeGain General Manager Louis Cammarosano told AOL Real Estate. He added that since HomeGain began administering the survey in the second quarter of 2009, the percentage of respondents who have expressed a bullish outlook on the market has never risen above 25 percent, and for much of the time, has sputtered around 15 percent.
The spike in optimism about home values follows recent reports that corroborate the view that the housing market is stabilizing. Home sales are trending upward and homebuilders are reportedly more optimistic than they've been in many years. Home prices continue to fall, but a number of industry observers say that price direction isn't necessarily the most important bellwether of a recovery.
Budge Huskey, president and chief operating officer of Coldwell Banker Real Estate, says he sees confidence among real estate agents that he hasn't observed since the housing meltdown. "What is consistently being represented out there today is that there is a sense of optimism in the real estate business that has not been seen in the last five to six years," he told AOL Real Estate.
While cautioning that real estate agents "tend to always be optimists," Huskey stressed that "this time it's based on what we believe to be some clear trends."
Prominent among the hopeful signs, Huskey says, is the state of the housing inventory, which had fallen to 2.3 million homes, or approximately a six-month supply of for-sale homes, as of January. That's the lowest level of inventory since March 2005, according to the National Association of Realtors, which released the statistic.
Meanwhile, total home sales have risen by 13 percent in the last six months, Capital Economics says. And while construction of new homes, dropped marginally in February, they still were at the second-highest level since October 2008, the National Association of Homebuilders says.
A last sign, much ballyhooed by industry optimists, is the state of homebuilders' confidence: The National Association of Home Builders sentiment index reached 28 in February and remained at that level in March. Not since 2007 have homebuilders expressed such confidence in the housing industry.
Despite sprouting green shoots in the market, home prices continue to slide, and even when they do eventually trend upward, many economists say, the increase will be gradual. That fact has led some industry observers to call for a rethinking of what actually constitutes a housing recovery, and to avoid treating price movement as the all-important indicator of a recovery.
Capital Economics, for instance, recently stated that even though prices declined last year (around 4 percent according to various estimates) and mortgage rates are finally ticking up, theeconomic analysis firm still believes that the real estate market is making inroads.
But CoreLogic senior economist Sam Khater advises against buying too much into the hype. "I would be cautious about folks getting too optimistic," he says.
The 1.6 million homes that are in a state of foreclosure are about to hit the market at a faster pace in the wake of an agreement reached between the government and major mortgage servicers over acceptable foreclosure practices, Khater says. That'll drive down prices, he says, as banks begin to push through foreclosures that they previously halted during negotiations of the $25 billion settlement reached last month.
"There's going to be a really long tail to this," he cautions. Still, Khater says that rising sales and the fact that fewer homes are flowing into the "shadow inventory" -- homes in a state of foreclosure -- are positive signs for the real estate market.
Huskey says the next healthy housing era will be a more "traditional market" that will stand in stark contrast to what he calls the "steroid years," when prices rose at an unsustainable pace.
As CNNMoney recently put it, "If you're waiting for home prices to go up, then you're missing signs the troubled housing market has finally turned around."
Gallery: 10 Places Where Home Prices Are Soaring
Real estate professionals also stress that a housing recovery should not be judged from a birds-eye view, since market conditions vary dramatically from state-to-state and city-to-city. In states walloped by the real estate market collapse, real estate agents are significantly more optimistic that home prices will rise in the next six months.
Eighty percent of Arizona real estate agents and homeowners, 75 percent of Nevada agents and homeowners and 51 percent of Florida agents and homeowners told HomeGain that they believe home values will rise in the next six months. The optimism in Florida dovetails with dramatic price gains recently reported by Realtor.com. The online marketplace reports that out of the 10 metropolitan areas that saw the highest price increases in their database in February of 2011, seven were in Florida. Miami median home prices increased by 26.19 percent, the listing service says.
Meanwhile, in states that weathered the housing crisis relatively well, a much higher percentage of real estate agents and homeowners believe that prices will drop. In Connecticut, 60 percent of agents surveyed said that they thought prices would continue to fall.
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