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Mortgage industry fares well in fiscal cliff deal, debt forgiveness law survives
By Kerri Ann Panchuk
January 2, 2013
The mortgage industry can breath a sigh of relief with the final fiscal cliff deal bringing back a popular tax break on mortgage insurance premiums and debt forgiveness for borrowers who go through a short-sale or some other type of debt reduction.
A topic that is still up for discussion and likely to surface later in the year is whether the popular mortgage interest tax deduction will be part of a long-term deficit reduction plan.
Still, the deal passed by the Senate and House on Jan. 1 is one that leaves room for hope in the housing market.
The American Taxpayer Relief Act of 2012 apparently extends a law that expired at the end of 2011, which allowed for the deductibility of mortgage insurance premiums, according to a research report from Isaac Boltansky with Compass Point Research & Trading. The law now applies to fiscal years 2012 and 2013.
“The law dictates that eligible borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year can deduct 100% of their annual mortgage insurance premiums,” Compass Point said.
“Certain borrowers with AGIs above $100,000 may benefit from the deductibility as well but are subject to a sliding scale. The tax break covers private mortgage insurance as well as mortgage insurance provided by the FHA, the VA, and the Rural Housing Service. In 2009, about 3.6 million taxpayers claimed the mortgage insurance deduction,” the research firm added.
One of the more watched provisions of the fiscal cliff was the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on Dec. 31.
The fiscal cliff deal extends it for another year, meaning homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from being taxed on the forgiven amount.
“The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence,” Compass Point Research & Trading said. “For homeowner’s to qualify, their debt must have been used to ‘buy, build, or substantially improve’ their principal residence and be secured by that residence. The law, which was passed in 2007 with a 5-year sunset provision, will now be in effect until Jan. 1, 2014.”
Another minor win for housing is a provision tied to the government’s plan to increase the capital gains tax rate from 15% to 20% for individuals who earn more than $400,000. While in theory, this is harder on higher-income homeowners, Compass Point sees a silver lining through an exclusion.
Compass Point notes the law “states that only gains of more than $250,000 for individuals ($500k for households) are subject to taxes on the excess portion of capital gains. Point being, in order for an individual homeowner to be impacted by the increased capital gains tax rate they would need to have an adjusted gross income above $400,000 and gain more than $250,000 from the sale of the property. Since this exclusion threshold remained intact, the impact of the capital gains tax increase is limited.”
The new “Medicare Tax” will apply to real estate transactions starting in 2013. his 3.8% surtax was passed in 2010 to help fund the new health care mandates and kicks in next year on many forms of investment income including some interest, dividends, rents and capital gains. Determining whether you will be subject to the tax is no easy matter. It is a confusing tax that has many tax attorneys and accountants scratching their heads. Hopefully, this article will give you useful information.
Santa Barbara framed by the Santa Ynez mountains and kissed by the Pacific Ocean is a hikers paradise. Here are a few of my favorite day hikes. They range from a short 45 minutes to 1/2 day trecks. I hope you will enjoy them as much as I do.
Whether for an early morning or evening hike, Inspiration Point is the perfect hike.
HIGHLIGHTS: For those who want to combine a two-hour workout, great views and access to cool spots such as Seven Falls as part of the trip up to the top, Inspiration Point is one of the best local hikes. You can reach the point from the Tunnel Road trailhead or the San Roque area, and with a shuttle make it a point-to-point trip that will test your muscles. How to Get There:From the Santa Barbara Mission drive up Mission Canyon Road to Foothill and turn right, then turn left several hundred yards later (by the fire station). Continue up Mission Canyon to the Tunnel Road turnoff, a half mile before the Botanic Garden. Continue several miles to the end. Park properly. The police frequently ticket illegally parked cars. The trail begins about three-quarters mile beyond the locked gate.
Cold Springs Trail
Deep and shaded by Trees, the perennial creek offers scores of places to spend an afternoon.
HIGHLIGHTS: Cold Springs represents the shortest distance you can travel to get the furthest away from Santa Barbara. Above the trailhead you will find bedrock pools and places to sunbathe, overlooks of the coastline and a route to the mountain crest. How to Get There: From Highway 101, take the Hot Springs exit and follow this toward the mountains until you reach the Highway 192/Foothill Road. Turn left and follow this for a mile to Cold Spring Road. Turn right and continue up to Mountain Drive. Park near the point where the creek crosses the road
Elwood Bluffs/ Monarch Butterfly Preserve
HIGHLIGHTS: This lovely hike through the Eucalyptus groves and protected bluffs offers access to a beach with 80-foot cliffs and to a Monarch butterfly Preserve where thousands of butterflies come to feed during the winter months. It’s an easy hike along the bluffs and is also a pleasant way to spend the day with beautiful ocean views.
How to Get There: From Highway 101 (North) take Glen Annie/Storke Rd Exit. Turn Left, and drive half a mile to Hollister Ave. Turn Right, and follow Hollister for about a mile to Santa Barbara Shores and drive to the end. Walk through the fence and enter the bluffs.
Rattlesnake Canyon Trail
HIGHLIGHTS: Rattlesnake Canyon is filled with cascading waterfalls and deep pools. The alder cover provides shade and a lovely green canopy. If you hike up the creek from the trailhead or take one of the many side trails leading down to the creek you’ll find the remains of a dam built in the early 1800s to service the Mission. Within just a few minutes drive from downtown Santa Barbara you can be hiking up this picturesque canyon, lost in its wilderness beauty. A connector leading to Tunnel Trail makes it possible to hike all the way to the crest.
How to Get There: From the Santa Barbara Mission drive up Mission Canyon Road to Foothill. Turn right, then left several hundred yards later (by the fire station). Continue up Mission Canyon past Tunnel Road to Las Canoas. Turn right and continue a mile and a half to an open area immediately preceding a narrow bridge. You’ll find a large sign there noting the start of the Rattlesnake Canyon Trail.
Looking for something new and exciting to enjoy this summer? Experience Santa Barbara’s own Greek festival this July. The 39th Annual Greek Festival is taking place from 11 am to 7 pm on Saturday, July 28nd Sunday July 29th in beautiful Oak Park. This unique festival evokes the sights, sounds and tastes that define the traditional Greek culture and way of life. Long considered to be one of the highlights of the Santa Barbara summer, the Greek Festival represents the only Greek cultural celebration of the year and is for many their only chance to experience the authentic Greek culture up close. Visitors can enjoy a plethora of traditional Greek foods, distinctive drinks, soulful music, lively dancing, and unforgettable costumes. Nearly 40 years ago, the festival originated as a fundraising session with parishioners of St. Barbara Greek Orthodox Church. Since then, that single fundraising event grew into a major annual event for the church, demanding months of planning and preparation.
This delightful festival allows you to stroll through Santa Barbara’s beautiful Oak Park, and experience the simple pleasures of life in a Greek village. Dozens of volunteers for the event enthusiastically staff their booths, creating an inviting, joyful, and welcoming atmosphere. But, what keeps festival-goers returning year after year is the delectable cuisine. Favories such as gyros, moussaka, and baklava are sure to please anyone’s taste buds. You can also listen to the distinctive sounds of the bouzouki and other exotic instruments played by authentic Greek musicians. Or, delight in the beautfy of the unique and elaborate costumes worn by performers as they partake in traditional dances that reflect the Greek culture. Clearly, The spectrum of activities to be enjoyed at this festival are endless.
So, for many of us longing for the sights and sounds of the Mediterranean, the Greek Festival is sure to offer a welcome escape on a sweltering weekend afternoon this July.
With the uncertainty of the real estate climate, home staging can be an effective tool to help sell your home quickly. Hiring someone to prepare your home so it makes a good impression on buyers can really pay off for several reasons.
1. Staged Homes Sell for More Money: Research verifies that stage homes on average sell for more than non-staged home. According to the NAR, stage homes sell for an average of 6.9 to 10 percent over listing price. Additionally, the average staging investment is between 1 and 3 percent of the homes asking price.
2. Staged Homes Sell Faster: Various statistics on the effects of home staging suggest that staged homes sell for 30 percent faster.
3. Low Cost: Most people don’t realize that home staging can be accomplished at a very low cost. A 2009 Home Gain Survey found that home staging typically provides a 586% return on investment.
4. Your online photos will stand out: In today’s tech savvy world, most buyers usually begin searching for homes first online. In fact, according to a NAR profile on buyers, over 90% of buyers are searching for homes online first before deciding to visit in person. Therefore, it is necessary to give buyers a reason to drive to your home by having several photos of beautifully staged rooms.
5. Sellers cannot View their House Objectively: In other words, if you cannot see your home objectively, then you cannot sell it effectively. Therefore, having a staging professional getting your home into its most advantageous condition for showing is of extreme importance.
6. Proper Staging Highlights your Home’s Strength’s and Downplays its Weaknesses
7. Only 10% of Buyers Can Visualize a Home’s Potential: This statistic proves why home staging is so crucial. By staging a home, you can avoid the fact of your home being overlooked and left up to the buyer’s imagination.
8. Staged Homes Appraise for Top Dollar: Staging your home will help secure an attractive appraisal. Once you sell your home, you need the appraisal to come in high enough in order to cover you mortgage.
9. The Money You Make on the Sale of Your Home May be Tax Free: With staging your home, there is the possibility of a tax-free capital gain by getting every dollar possibly while getting a possibly tax deductions or spending on staging services in order to improve and sell your home.
10. Leaving your Home in it’s Original State Will Only Help Your Competitors: In today’s real estate market, competition is stiff and many buyers have been discovered to have high expectations. Therefore, the key to making sure your home stands out against those of competitors is to engage in professional staging. This is due to the fact that it not only creates compelling online presentations, but also driver buyer traffic to the home, who could ultimately be the potential buyers.
Dozens of images come up when our mind sweetly wanders to the historic mission town of Santa Barbara: palm tress and pleasantries, organic eats, Oprah’s mega-mase, suntans and sand beneath our toes, majestic mountain peaks… the list goes on and on. Our city plays host upscale urbanites, mavens of mellow, and even on-the-fly overnighters. It’s really the ultimate territory to explore for any kind of escape artist. With summer just around the corner, now is the perfect time to discover some of Santa Barbara’s best-kept secrets for enjoying everything our beautiful beach town has to offer. Whether you’re a spa junkie or a culinary enthusiast, here’s a to-do list spanning from State Street to Montecito that grants the best quest in the West.
Opal Restaurant and Bar
Where: 1325 State St
What: A local’s favorite, opal restaurant and bar infuses an eclectic California cuisine with creative influences from around the world.
The Dish:The expansive menu offers a vast array of options that not only reflect the local flavors of Santa Barbara, but also incorporates unique dishes with exotic flavors. From Chili-Encrusted Filet Mignon, to lemon grass crusted Salmon, homemade pastas, gourmet pizzas, fresh baked breaks, deliciously imaginative salads and homemade desserts, the options are endless. Opal radiates a warm and friendly atmosphere, which reflects the very character of our friendly beach town itself. A full bar also serves innovative martinis and the Wine Spectator award-winning wine list has 40 wines by the glass to pair with each course.
Where: 1311 State St
What: A sister restaurant to Montecito Café, this delightful family owned and operated establishment serves both lunch and dinner in a spacious and warm dining room, which includes features such as a two-story fireplace and natural wood settings.
The Dish: Jane offers several delicious dishes that are sure to satisfy any craving. From creative and flavorful salads to juicy burgers, fresh seafood, to tantalizing desserts such as homemade coconut cake. Patrons can enjoy a romantic meal on the tiny second story patio or share a flat iron steak or a daily fish special at the bohemian communal dining table. Ultimately, this exceptional dining spot represents Santa Barbara’s local flare with its friendly service and innovative cuisine.
Santa Barbara Hikes
Santa Barbara offers some of the best hiking trails in all of Southern California. From mountain hikes, beach hikes, to inland hikes, Santa Barbara has a vast array of trails that are sure so meet the needs of any hiking enthusiast. Popular hikes among locals include: E. Camino Cielo, Ellwood Butterfly Grove, Tunnel Trail, Rattlesnake Trail, Gold Spring Trail, Inspiration Point, and Sand Ysidro Trail.
Float Luxury Spa
When looking for the ultimate Santa Barbara spa experience, look no further than Float Luxury Day Spa. Located downtown on 18 E. Canon Perdido St, this quaint and inviting spa offers everything from massages, facials, body treatments, and waxing in a peaceful and tranquil setting. Featuring a coastal modern design, Float is light and airy, modern and comfortable. You can also enjoy all the facilities form the beautifully appointed locker rooms, to the sky lounge or private garden with reflecting pool and fountain. Whether you are looking for a quick pick me up or a long day of relaxation, this local day spa is sure to inspire rejuvenation and renewal.
Santa Barbara Art Museum
In a city so rich with striking artifacts, a trip to the Santa Barbara Museum of Art is definitely in order. Home to world-class art and exquisite exhibitions, this museum showcases a breathtaking collection of artistic treasures from American, Asian, European and more, and is sure to satisfy anyone’s yearning for cultural enrichment. Not only does this intimate space feel more like a teensy gallery than an actual museum, but it also is a lovely way to brush up on the history of the city. You’ll want to check out the pretty pieces that populate this quaint spot. The museum is located downtown on 1130 State Street.
Who doesn’t love shopping around for fresh foodie finds — especially on a cool, coastal afternoon? The Santa Barbara Farmers Market located on 232 Anacapa Street, hosts an array of color-soaked produce every Tuesday and Saturday. It’s a collaborative market with a diverse atmosphere, and supplies eco-conscious customers with tasty, locally grown produce and homemade goodies. This favorite local tradition reflects Santa Barbara’s mantra of living a healthy lifestyle by eating locally grown, organic food while supporting sustainability and environmental preservation.
Local real estate market appears to reflect positive conditions. Sales are up strongly and inventory is down. Months of inventory for Santa Barbra’s South Coast, from Carpinteria to Goleta is at 2.6 months; 2.8 months for houses and Planned United Development (PUDs) and 2.3 Months for condos. Currently, buyers are signing offers, writing deposit checks negotiating great prices, and entering escrow at increasing rates. Essentially, these positive indicators along with current house and condo prices, has contributed to an increase in the number of qualified buyers in the market place. For instance, the number of house and PUDS entering escrow through the end of April 2012 was up 46% over the first four months of 2011, while closed escrows for houses and PUDS totaled 340.
However, buyers in the under-$800,000 market and in other higher price ranges are now having to cope with the multiple offer process. This in effect has led to a situation in which buyers who have been waiting on an appropriate time to enter the market, find that two, four or six other prospective buyers are bidding on the same property. The only way to ease this problem is for buyers to work closely with their Realtor, who in turn will let them know when a property does become available.
In terms of prices, the median price for house and PUDs through the end of April is $785,000, which is down 3.1% for the same period reported a year ago. By removing both Montecito and Hope Ranch, the median is down 0.8%. These statistics represent a decrease of 33.5% from 2008’s first quarter median price of $1,180,000. Additionally, from 2005-2008, the South Coast median price for houses and PUDs was around $1,200,000; 2009 the median fell to $827,500. In 2010, the median increased slightly to $840,000, while in 2011 the median dropped to $810,000. For condos, there were 102 closed escrows with a median price of $3999,995.
Furthermore, the effect in recent years of distressed sales on the local market has been notable. Consequently, sellers have had to price their homes in the same range as the new level set by both neighborhood sales of bank-owned properties and short sales. The percentage of these sales in Santa Barbara County has persisted around 30% while cities such as Fresno have experienced 70% of distressed sales closings. Additionally, the short sale process has been improved, with most closing in 3-5 months.
Table 1 reflect months of inventory separated by each community. For instance, Goleta has only 1.3 months of inventory, while Montecito, which has a larger proportion of higher-priced homes has 5.6 months of inventory. This statistic appears to illustrate both an active and varied market between buyers and sellers.
Table 2 demonstrates how much stronger sales have been ompared to the 5-year averages for houses, PUDs, and condos. As you can see, sales have increased each month since November 2011. Furthermore, the line above the bar graph shows current pending sales on an upward trend, thus providing further indication of strong market activity. Lastly, Table 3 illustrates the distribution of market activity across a wide spectrum of prices. Clearly, the largest number of sales for houses and PUDs is occurring in the $500,000 to $700,000 price range, while for condos, the most dynamic range is from $300,000 to $500,000.
In conclusion, it appears that environmental conditions for Santa Barbara and its surrounding communities reflect attractive opportunities for expansion. However, the supply of current homes remains sparse while the demand to live in our community continues to increase. Ultimately, by analyzing current real estate market signals along with an increase in buyer’s confidence may indicate the fact that current prices have reached the bottom.
(see pdf for Tables)