McKeever Real Estate

July has come and gone and its time to take a look at the effect  to the Stockton Real Estate Market with the expiration of the home buyers tax credit.

July sales by area 2010 vs. 2009

AREA                          July 2010 Sales                  July 2009 Sales

Stockton                      369                                           571
Lodi                              62                                            67
Manteca/Lathrop     145                                           214

Impact of tax credit was enormous

Sales and For Sale in the last 12 Months

The monthly sales stats paint a very clear picture– the effect of the tax credit on the Stockton area real estate market was ENORMOUS.

Here are some things that jump out at us, when we look at these numbers:

• Sales in the San Joaquin County dropped 32% in July
• Stockton was the loss leader– a whopping 34% fewer July sales
• Lodi saw only a small dip in sales, relative to the other areas.

What does the rest of 2010 hold?

It is not obvious that the tax credit was holding the real estate market up and had increased the demand for housing.  Now that it has expired, we will see how the buyers react and will get a true demand and gage of the market strength.

Traditionally, July and August are when buying is at its yearly peak.  The slow-down begins in the fall and into the winter months.  But with the peak of the market already taken a dive it doesn’t look to good for the remainder of 2010.  The one positive aspect to this market is the historically low interest rates.  However, I’m not sure this will convince buyers to continue their activity as shown earlier in the year.

For reference, there were 510 sales in Stockton area in the month of August 2009.  In order to reach that mark again, demand in the area is going to have to do a dramatic turn around.

If you have any questions about any of these real estate stats, please don’t hesitate to leave a comment on this post.

Inventory of homes for Sale in past 12 Months- Click for larger image

Points!  Those pesky fees charged by banks and loan brokers are annoying and can sometimes be incredibly large.  The good news is that that fee can be deducted on your taxes.

The IRS says so! Surprisingly the IRS site on points is very easy to read.

Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.  I have read the IRS page on points and I believe I have a clear understanding of how it works.  However, I am not a tax professional nor do I give tax advice.

Attention Home Buyers:  Please, please, please consult your accountant to see how much you can write off.  Be sure to save your HUD-1 (the form which breaks-down the money) that you the receive from escrow.

So how is it deducted?  Here is the example taken from the IRS site.

Have more questions?  Read the IRS instruction for yourself on points:

http://www.irs.gov/publications/p936/ar02.html#en_US_publink1000229936

I recently got an email from TreXglobal, an online propery management software company, regarding the top 10 overlooked Tax tips.  I found many of them to be useful so I reprinted them here.

Please note I am not an accountant and do not claim to know everything there is to know about rental income tax laws.  I would advise you to speak to your accountant about any of the tips list here.  :)

#1 RENTAL INCOME TAX TIPS

The lower your rental income for the year, the less that you will owe in taxes. By minimizing your rental income, you can reduce your taxable liability.

This does not mean you should stop collecting rent, it just means you might not have to include all the rent you’ve collected in your taxable rental income.

1. You don’t have to report your rental income if you rented out your property or vacation home for 14 days or less.

2. Rental income is taxable in the year it is collected. If you did not receive the last month’s rent in the current year, do not report the income in the current year.

3. Exclude Security Deposits from your rental income if you plan on returning the deposits at the end of lease.

#2 MINIMIZE TAXABLE GAIN USING SALE EXPENSES

Many real estate investors overlook deductions when they sell their property. If you sold your rental property for a gain, make sure to minimize taxes by accounting for sale expenses – like closing costs, which can be found on the property’s settlement statement. read more »

A recent CNN article menitonied 3 reasons why home prices will slide in 2010.

• More Forecloures coming to the market
• Higher Interest Rates
• Expiration of the tax credit (April 30th)

Dave’s take:

First of all I hope let me say that I hope i’m am right.  I sure don’t want my personal home to keep declining in value.

Real Estate is local local local. Working in a high foreclosure area in Stockton, Ca, I agree with the articles first point to a slight degree. Here in Stockton we are getting multiple offers on these foreclosed homes. I’m talking 5-15 offers! Our inventory is down to 1.4 months. A normal market is 6.5 months. An increase in supply of homes in our market will not hurt our prices to much. It will bring it back to a more normal supply and demand.

Rates will affect prices. Higher rates=less qualified buyers. Less buyers =more homes on the market= price drops.

The Tax Credit: Many people I speak to are buying because of the affordability of today’s home prices. Most could not have bought 3-4 years ago. The Tax credit is just a bonus for buying now! Come summer when prices are still low they are not going to stop buying because the tax credit went away. They are buying because they can own a home for less than what it would cost to rent.
David McKeever with http://mckeeverrealestate.com Stockton Ca

Why Buy? 

There are many reasons you may wish to buy a home, whether you need or want:

On the other hand, you may not be ready to buy a home. Buying a home:

The purchase of a home is, in part, a financial transaction.  Much like a trip to the grocery store to buy coffee, you have many choices and a significant price range. But unlike a bag of Costa Rican coffee, a house has certain bonuses: Equity, Tax Savings and Ownership.  What’s all that mean? Read on.   read more »

UPDATED!!!! The tax credit has been extended!!!!

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

Most people know this is a great time to buy Real Estate because of the deflated prices and historically low interest rates.  But there is more!  The Government gave us more incentive by giving first time home buyers a tax credit.  I wanted to share the main points of the tax credit with you.

2009 FIRST-TIME HOME BUYER TAX CREDIT FACT SHEET

Who is Eligible

read more »