For release:
May 15, 2012

Spring home buying season off to strong start,
home sales and price post impressive April results, C.A.R. reports

LOS ANGELES (May 15) – California home sales and median price both jumped in April, with sales shooting up to their highest level in more than two years, and the median price rising above $300,000 for the first time in 16 months, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. 

“A brighter economic picture, coupled with record-high housing affordability, pushed the spring home buying season off to a strong start,” said C.A.R. President LeFrancis Arnold.  “With a continuing improving economy and interest rates declining to new record lows in recent weeks, we should see a steady improvement in the housing market throughout the end of the year.”

Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted annualized rate of 555,300 units in April, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  Sales in April were 10 percent higher than March’s pace and 11 percent higher than in April 2011.  The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the April pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The statewide median price of an existing, single-family detached home climbed 5.7 percent in April to $308,050, up from March’s revised $291,330 median price and 4.7 percent from a revised $294,140 recorded in April 2011.  The median price rose above the $300,000 mark for the first time since December 2010.

“The median home price climbed for the second straight month with solid gains from both the previous month and year,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “A sales improvement in the higher price segments of the housing market was a contributing factor to the price increase, as non-seasonally adjusted sales of homes priced higher than $500,000 increased nearly 11 percent, while sales of homes below $500,000 edged up a modest 2.1 percent.”

“Additionally, the strong sales increase of higher-priced homes resulted in a considerable decline of inventory of homes in the higher price ranges when compared with last year.  This signifies the tight supply conditions we’ve been experiencing in the lower price ranges over the past several months are now extending into the upper price ranges.”

Other key points of C.A.R.’s April 2012 resale housing report include:

• California’s housing inventory remains low, with the Unsold Inventory Index for existing, single-family detached homes remaining at 4.2 months in April, unchanged from a revised 4.2 months in March.  April’s housing inventory was down from a revised 5.6 months in April 2011.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A 7-month supply is considered normal.

• Interest rates remained extremely low in April, with 30-year fixed-mortgage interest rates averaging 3.91 percent, down from 4.84 percent in April 2011, according to Freddie Mac.  Adjustable-mortgage interest rates averaged 2.78 percent in April 2012, compared with 3.20 percent in April 2011.

• The median number of days it took to sell a single-family home fell to 49.3 days in April 2012, down from a revised 53.2 days for the same period a year ago.

• View Unsold Inventory by price range. 

Note:  The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only.  County sales data are not adjusted to account for seasonal factors that can influence home sales.  Movements in sales prices should not be interpreted as changes in the cost of a standard home.  Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold.  Due to the low sales volume in some areas, median price changes in December may exhibit unusual fluctuation.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

April 2012 County Sales and Price Activity
(Regional and condo sales data not seasonally adjusted)

April 2012 County Unsold Inventory and Time on Market
(Regional and condo sales data not seasonally adjusted)

For release:
April 24, 2012 

From California Association of Realtors website

California pending home sales up for third straight month, highest level in nearly three years

LOS ANGELES (April 24) – California pending home sales posted higher for the third consecutive month in March, rising from both the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.  Additionally, the share of distressed sales dropped for the second consecutive month, as equity sales typically increase with the start of the spring home buying season.

Pending home sales:

C.A.R.’s Pending Home Sales Index (PHSI)* rose from a revised 126.5 in February to 143.7 in March, based on signed contracts.  The March 2012 index was the highest since April 2009, when the PHSI was 146.9.  The index also was up from the 128.9 index recorded in March 2011, marking the eleventh consecutive month that pending sales were higher than the previous year.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

Distressed housing market data:

• The share of equity sales – or non-distressed property sales – compared to total sales increased in March to 55.4, up from 51.1 percent in February.  Equity sales made up 50.2 percent of all sales in March 2011.
• Meanwhile, the total share of all distressed property types sold statewide decreased in March to 44.6 percent, down from February’s 48.9 percent and from 49.8 percent in March 2011.
• The share of short sales was down again in March.  Of the distressed properties sold statewide in March, 21.1 percent were short sales, down from February’s share of 23 percent but up from last March’s share of 20.1 percent.
• The share of REO sales also declined in March to 23.1 percent, down from February’s 25.2 percent and down from the 29.4 percent recorded in March 2011.

 
Share of Distressed Sales to Total Sales
(Single-family)

Single-family Distressed Home Sales by Select Counties
(Percent of total sales)

**Note:  C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state.  Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market.  A sale is listed as pending after a seller has accepted a sales contract on a property.  The majority of pending home sales usually becomes closed sales transactions one to two months later.  The year 2008 was used as the benchmark for the Pending Homes Sales Index.  An index of 100 is equal to the average level of contract activity during 2008.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles. 

Some homeowners better off not taking home office deduction

By Tom Kelly
Inman News®

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One of the biggest financial advantages of owning a home is the mortgage interest deduction, but the amount many taxpayers submit is often greater than the allowed limit.

And, while home offices have become more popular because of convenience and the downturn in the economy, many homeowners may be better off not taking the deduction because of the depreciation recapture upon sale.

Both the mortgage interest and home office topics need to be double-checked before the April 17 deadline. Why April 17 this year instead of April 15? According to the Internal Revenue Service, taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday.

In addition, Emancipation Day, a holiday observed in Washington, D.C., falls this year on Monday, April 16. According to federal law, Washington, D.C., holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.

Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns. Remember that an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty if timely payment is not made.

In a recent column, we discussed the benchmark for the mortgage interest deduction is set at acquisition debt, which is the amount of debt in place when the home is acquired. For example, if you buy a $200,000 home with a $50,000 down payment, your acquisition debt is $150,000.

Many consumers stay in their homes for years, accumulate appreciation and then refinance to put a child through school, mom into a nursing home or attend a much anticipated family reunion. The new debt on the refinance will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing.

For example, let's assume your home is now worth $300,000 and you need to take cash out for college tuition. The balance of your loan before you refinance is $135,000 and you take $100,000 "cash back" for a new loan balance of $235,000.

However, the maximum allowable mortgage interest deduction remains $135,000 -- the acquisition debt, not the bigger number from the refinance.

Another popular deduction that is often taken yet needs additional consideration is the home office deduction. It's relatively easy for taxpayers to deduct the cost of a home office. To qualify for a deduction, the space must be used exclusively and on a regular basis for either the entire business or its administrative and management activities.

If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be "for the convenience of your employer."

A home office deduction is comprised mainly of depreciation, utilities and insurance. For example, if a home has 2,500 square feet and the detached garage now deemed "the office" is 250 square feet, then 10 percent of the utilities and insurance are deductible.

The actual office depreciation is 10 percent of what would be a depreciation deduction if the entire home were being depreciated for tax purposes. (Depreciation is not allowed on a typical principal residence, so the square footage allotted to "residence" would not qualify.) Supplies and other expenses directly related to the home office are fully deductible.

However, all these benefits do come at a price. The tax law originally stated that if you sell your home at a gain, any depreciation for a home office will have to be "recaptured." That means that any profit on the business portion is taxable as capital gain.

On Dec. 23, 2002, the IRS issued new regulations concerning gain on home sales. As long as the home office was in the same structure and not separated from the home, only the depreciation taken for the home office after May 6, 1997, is subject to tax.

Still, that depreciation recapture amount could be a lot more than you expect. It may be worthwhile to simply work from home and not deem the space a "home office."

Congress considers extension to mortgage-debt relief deadline

Action not expected until post-election

By Ken Harney

Inman News®

Share This For anyone hoping that a fractious, election-bound Congress can manage to extend a law that is crucial to the housing recovery -- the Mortgage Forgiveness Debt Relief Act -- here's a little good news: Before heading home for the Easter holiday recess, key members of the House and Senate tax-writing committees introduced bills that would keep the law alive through 2014.

Without action by Congress, the law -- which allows homeowners whose mortgage debts have been written off by lenders in short sales, foreclosures, principal reductions and deeds-in-lieu of foreclosure to escape heavy federal taxation on the amounts forgiven -- would expire Dec. 31, 2012.

Real estate and mortgage trade groups believe that any expiration would be disastrous for large numbers of underwater owners trying to rid themselves of smothering debt loads.

It could also sharply reduce the appeal of short sales and other resolutions needed to clear out distressed inventories.

If homeowners thought they'd be penalized for agreeing to principal reductions and debt cancellations, they'd be far less likely to participate.

That, in turn, could hamper efforts like the $25 billion nationwide robo-signing mortgage settlement, which features more than $10 billion in debt forgiveness, as well as the Obama administration's efforts to spur short sales and principal reductions at Fannie Mae and Freddie Mac.

Until the tax code was amended in 2007, the Internal Revenue Service treated owners whose unpaid principal balances were canceled as having received actual income from the transaction and hit them with tax bills.

For example, in a short sale where the lender wrote off $100,000 of unpaid mortgage debt prior to 2007, the federal tax code treated the $100,000 as ordinary income to the seller and the IRS imposed tax levies at regular rates.

Though the prospects for quick action on the issue are virtually nonexistent, the sudden introduction of multiple bills on both sides of Capitol Hill can only be a positive sign.

In the Senate, Finance committee member Debbie Stabenow (D-Mich.) joined with fellow Democrats Robert Menendez (New Jersey), Sherrod Brown (Ohio) and Jeff Merkley (Oregon); and two Republicans: Dean Heller (Nevada) and Johnny Isakson (Georgia), on a proposed extension (S 2250) through Dec. 31, 2014.

In the House, 14 of the 15 Democrats on the Ways and Means Committee -- the point of origination for most tax legislation in Congress -- are co-sponsoring a bill (HR 4202) with the same provisions as Stabenow's.

One Republican on the Ways and Means Committee, U.S. Rep. Tom Reed of New York, also is introducing an extension bill, but the text and bill number were not immediately available.

President Obama's fiscal 2013 federal budget proposal calls for an extension through 2014, which congressional analysts estimate would cost the government $2.7 billion in tax revenues over the coming two years.

In a statement, Stabenow said, "It is bad enough that so many families are faced with mortgages that now exceed the value of their home.

"But to add insult to injury, without this bill the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That's just wrong."

The lack of more Republican co-sponsors on Reed's bill may point to difficulties for the debt relief extension that could materialize as early as the end of this month.

The Republican-controlled Ways and Means Committee says it plans to look at all "extenders" -- expired or soon-to-lapse special benefit programs ranging from corporate research and development tax credits to individual homeowner write-offs for residential energy improvements -- within the next two weeks.

If the Republican majority decides that mortgage debt relief is just another contributor to the federal deficit, the House version of bills could be derailed indefinitely.

(Remember that last December, House and Senate conferees deferred action on a long list of extenders -- including deductions for private mortgage insurance premiums -- and they all remain in legislative limbo.)

But tax analysts and lobbyists on Capitol Hill say the most likely scenario shapes up something like this: Though the National Association of REALTORS® and other groups will push for early consideration of the debt relief extender, it's unlikely that Congress will be able to focus on a major revenue package until after the November elections.

Then, the victors and lame ducks from both houses will have to do the year's tough lifting: They'll take up the entire range of budget, deficit and debt-ceiling issues during several frenetic weeks, and finally hammer out an omnibus bill that includes either a one- or two-year new lifeline for mortgage debt relief.

Though there's a chance the entire process will break down again as it did last year, Jim Tobin, chief lobbyist for the National Association of Home Builders, told me last week, "We remain optimistic that once we get past the election and into a robust lame duck session, Congress will do the right thing" on mortgage forgiveness.

"But any way you look at it," he added, "taxing (financially distressed) homeowners on phantom income is just inequitable."

Plus, it makes absolutely no economic or political sense for either party -- whether we have a President Romney and Republican majorities in both houses, or President Obama and the Democrats come away big winners -- to kick homeowners when they're already down.

Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.

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