Dove on the Kitchen Window

As I came home last night, I caught the changing of the guard over the two mourning dove eggs on my kitchen window. The male dove sits on the nest during the day, and the female takes the night shift. The female perches in a nearby tree during the day, and has performed the broken wing ploy to distract me from the nest.

Sellers: Thinking of Renting Until the Market Improves?

Many people who want to sell their home become discouraged with the low-ball offers and the difficulties buyers experience getting financing. Over half of the sales in Tucson are foreclosures and short sales, and these sales must be used as comparable sales on the buyer's appraisal. The result is, non-distressed sellers are seeing their property values dragged down by the ongoing flood of distressed sales.

Eventually every frustrated potential seller considers the idea of renting their house until the market improves. They usually hope this will be in two years or less.

I won't pretend to predict whether we will be through the huge backlog of foreclosures in the next two years. Some prognosticators claim their crystal balls say we will. Others state just as convincingly that we won't.

Suppose prices are still bumping along the bottom two years from now? At that point, the homeowner becomes ineligible for the waiver of capital gain tax on the sale of their home.

Currently, if a person or couple has lived in a house for two of the past five years, they enjoy tax-free capital gain up to $250,000 for a single person, and $500,000 for a married couple. Once the house has been a rental for two years, any capital gains will be taxed at whatever the capital gain rate is. Currently, it's 15%.

While the house is a rental, the sellers will probably have expenses for repairs and maintenance. They may also have no rent in months when the property is vacant or the tenants aren't paying the rent.

Waiting for the market to improve may be a viable strategy, but sellers need to consider that the risks and expenses may outweigh the potential benefit.

New Flood Plain Maps Coming in June

New flood plain maps will take effect on June 16. Some homeowners who didn't need flood insurance in the past will now be required to buy it if their mortgage is federally-insured.

Check this article for more info.

Homeowners who buy flood insurance before the new maps take effect can get a significant discount for the first few years.

To cut to the chase and see whether your property is affected, go the the maps here.

Mortgage Interest Deduction in Peril?

I received a YouTube video from the president of the National Association of Realtors imploring me to write my Congresswoman and beg her not to eliminate the mortgage interest deduction. Apparently, MID is on the chopping block in an attempt to increase tax revenue.

Nowhere in the video was the truth about the threatened MID disclosed. I had to click on a link to get the rest of the story. NAR says:

Individuals are permitted to deduct mortgage interest paid on mortgage debt of up to $1 million. Mortgage interest on up to $100,000 of debt on home equity loans or lines of credit also qualifies for the deduction.

As part of its FY 2011 budget, the Administration has proposed limiting the value of the MID for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals who are currently in the 33% or 35% tax brackets. Individuals with incomes below $250,000 would generally not be directly affected by this proposal.

The mortgage interest deduction (MID) is a remarkably effective tool that facilitates homeownership. While only about 30% of all taxpayers in any given year itemize their deductions, more than 3/4 of homeowners utilize the deduction over the period they own their home.

NAR opposes any changes that would limit or undermine current law.

Currently, taxpayers in the 33% and 35% income brackets are able to reduce their taxes through deductions for mortgage interest payments, charitable contributions, local taxes and other expenses by 33 and 35 cents, respectively, on the dollar. Under the Administration’s proposal, these individuals would only be able to reduce their tax bill by only 28 cents on the dollar. The Administration estimates that the change would raise $318 billion over the next 10 years.

So the MID remains untouched for most of us. People who earn more than $250,000 do not need the MID to "facilitate home ownership".

March Residential Sales Statistics

The Tucson Association of Realtors has released the residential sales statistics for March 2011. I surely am mystified by the trend, or more accurately, lack of a trend, in the average sale price over the last three months. From December 2010 to January 2011, it went down 10.41%. From January 2011 to February 2011, it went up 9.22%. From February 2011 to March 2011, it went down 10.31%. What will April bring? Up 9%, I hope.

At $163,590, the average sale price is almost 19% below March 2010. The last time the average sale price was that low was September 2002.

Short sales accounted for almost 9% of the sales, and 45% of the sales were foreclosures.

Investors with cash continue to dominate the market, snapping up 37% of the houses sold last month. There are a lot of bargains to be found, but people who need to get financing are unable to buy the most steeply discounted houses because mortgage lenders require houses to be habitable. A great many of the foreclosed houses have been trashed by previous owners or vandals.

The Boys of Summer are Back in Town!

Somehow I missed this in the March Madness. Am I the last one to know that Tucson has a new AAA baseball team? Mike Feder is back from New Orleans and he has managed to get the San Diego Padres AAA team, the Portland Beavers, to come to Tucson! Unfortunately, they will play at Kino Stadium instead of the much cooler Hi Corbett. But at least that big albatross will have some life in it and maybe Tucson can pay off the debt we were swindled into assuming when it was built.

More good news: they are going to hire local food providers, and will "sell things that people want, not just ballpark fare." And they will have monthly fireworks.

Opening day is April 15. Play ball!

Super Moon

Did you see the Super Moon last Saturday? It was closer to the Earth and bigger and brighter than usual. Monday morning that big old Moon peeked through my venetian blinds at 6:00 AM and woke me up. I went out to watch the Moon set and the Sun rise.
It looked to me as though the saguaro was roasting marshmallows.