good reminders from Bob Vila...
from bobvila.com
Winter Preparation Checklist
Conduct a thorough inspection before the season’s first cold snap as part of your winter preparation.
Give your home a once-over and tend to winter preparation tasks and repairs before the year’s first frost. “Getting the exterior of the home ready for the cold winds, snow and ice is critical for keeping Old Man Winter out and keeping it warm and toasty inside,” says Reggie Marston, president of Residential Equity Management Home Inspections in Springfield, VA. By being proactive, you’ll lower your energy bills, increase the efficiency and lifespan of your home’s components, and make your property safer.
Windows and Doors
•Check all the weatherstripping around windows and doorframes for leaks to prevent heat loss. Replace weatherstripping, if necessary.
•Replace all screen doors with storm doors.
•Replace all window screens with storm windows.
•Examine wooden window frames for signs of rot or decay. Repair or replace framing to maintain structural integrity.
•Check for drafts around windows and doors. Caulk inside and out, where necessary, to keep heat from escaping.
•Inspect windows for cracks, broken glass, or gaps. Repair or replace, if needed.
Lawn, Garden, and Deck
•Trim overgrown branches back from the house and electrical wires to prevent iced-over or wind-swept branches from causing property damage or a power problem.
•Aerate the lawn, reseed, and apply a winterizing fertilizer to promote deep-root growth come spring.
•Ensure rain or snow drains away from the house to avoid foundation problems. The dirt grade — around the exterior of your home — should slope away from the house. Add extra dirt to low areas, as necessary.
•Clean and dry patio furniture. Cover with a heavy tarp or store inside a shed or garage to protect it from the elements.
•Clean soil from planters. Bring pots made of clay or other fragile materials indoors. Because terra cotta pots can swell and crack, lay them on their sides in a wood carton.
•Dig up flower bulbs, brush off soil, and label. Store bulbs in a bag or box with peat moss in a cool, dry place for spring replanting.
•Remove any attached hoses and store them away for the winter to prevent cracks, preserve their shapes, and prolong their life. Wrap outside faucets with covers to prevent water damage.
•Shut off exterior faucets. Drain water from outdoor pipes, valves, and sprinkler heads to protect against pipe bursts.
•Inspect decks for splintering, decay, or insect damage and treat, if needed, to prevent further deterioration over the winter.
•Clean leaves, dirt, and pine needles between the boards of wooden decks to thwart mold and mildew growth.
•Inspect outdoor lighting around the property. Good illumination will help minimize the chance of accidents on icy walkways at night.
•Check handrails on exterior stairs to make sure they’re well secured.
Tools and Machinery
•Bring all seasonal tools inside and spray them with a coating of lightweight oil to prevent rust.
•Weatherize your lawn mower by cleaning off mud, leaves, grass, and debris.
•Move your snow blower and shovels to the front of the garage or shed for easy access.
•Prepare the snow blower for the first snowfall by changing the oil and replacing the spark plug.
•Sharpen ice chopper and inspect snow shovels to make sure they’re ready for another season of work.
•Make sure you have an ample supply of ice melt or sand on hand for steps, walkways, and the driveway.
Heating, Ventilating, and Air Conditioning
•Inspect the firebox and flue system to ensure that they’re clean of any soot or creosote and that there aren’t any cracks or voids that could cause a fire hazard.
•Check fireplace for drafts. If it’s cold despite the damper being closed, the damper itself may be warped, worn, or rusted. Consider installing a Chimney Balloon into the flue to air seal the area tightly.
•Clean or replace the air filter in your furnace for maximum efficiency and improved indoor air quality.
•Clean your whole house humidifier and replace the evaporator pad.
•Bleed valves on any hot-water radiators to increase heating efficiency by releasing air that may be trapped inside.
•Check that smoke alarms and carbon monoxide detectors are in working order.
•Remove air conditioners from windows or cover them with insulated liners, to prevent drafts.
•If you have an older thermostat, replace it with a programmable unit to save on heating costs.
•Install foam-insulating sheets behind outlets and switch plates on exterior walls to reduce outside airflow.
•Make sure fans are switched to the reverse or clockwise position, which will blow warm air down to the floor for enhanced energy efficiency and comfort.
•Flush a hot water heater tank to remove sediment, and check the pressure relief valve to make sure it’s in proper working order.
•Examine exposed ducts in the attic, basement, and crawl spaces, and use a sealant to plug up any leaks.
Gutters, Roof, and Drains
•Check for missing, damaged or warped shingles and replace, as necessary before you get stuck with a leak.
•Check for deteriorated flashing at the chimney, walls, and skylights and around vent pipes. Seal joints where water could penetrate, using roofing cement and a caulking gun.
•Check the gutters and downspouts for proper fastening, and re-secure if loose or sagging. The weight of snow and ice can pull gutters off the house.
•Clean gutters of any debris. Make sure downspouts extend away from the house by at least 5 feet to prevent flooding of the foundation and water damage from snowmelt.
•Clean leaves and debris from courtyard and pool storm drains to prevent blockages.
•Ensure all vents and openings are covered to prevent insects, birds, and rodents from getting inside to nest in a warm place.
Done? Congratulations! You’re officially ready for winter.
Tuesday, November 15, 2016
Top 5 Reasons to Buy a Home During the Holidays
more food for thought on real estate and buying during the holidays...
from moneytips.com
Few people like to uproot their family and go through the stresses of home buying and moving during the holidays, but for those who do not mind, the holiday season may provide home buying bargains. Here are a few of the reasons why.
•Less Market Activity – Lots of family, school, and work activities, combined with the weather in many locations, lead to fewer real estate transactions over the holidays. Since fewer people overall are looking to buy houses, you will have less competition for your preferred house – and this gives you leverage.
Holiday home sellers often have to adjust their price downward or make other concessions if they want to sell. Keep this in mind as you search for homes. Bargains may be available, and listed prices may be more open to negotiation.
•Motivated Sellers – People who are selling their homes over the holidays often have great incentive to sell, such as an upcoming job relocation. If a house has already been on the market for some time, that incentive is multiplied.
You may be able to use this urgency to your advantage (assuming you are not in a similarly urgent need to buy). Negotiate fairly but firmly with sellers and you should be able to extract a lower price and/or other concessions like paying part of the closing costs.
•Potential Tax Advantages – If you itemize your taxes, you can deduct any points you paid upon closing, as well as property taxes and mortgage interest. Whether it is to your advantage to buy before or after year’s end depends on factors such as how many other deductions you have this year and expect to have next year.
It is best to consult with a tax professional before purchase. Even though you do not want to make a decision on a home purchase strictly for tax reasons, it could be to your benefit to close before the end of the year.
•Better Interest Rates – Within the general trend of interest rates, there is often a cyclical trend of lower interest rates during the holidays – not from the generosity of lenders but due to limited demand forcing greater competition among lenders.
There are plenty of factors that can obscure or swamp this cycle, but in general, you should see preferable interest rates around the holidays compared to the times immediately before or after.
•Faster Closings – Generally, all parties involved have incentive to complete transactions toward the end of the year. Lenders want to close their books, real estate agents want to receive their commissions before the year closes, sellers want to move on to their new home and settle in for the holidays – and just like the sellers, you want to settle in as well.
Since all parties are motivated and there are fewer transactions taking place during this time, it should be easier to put everything in place for a smooth and rapid closing.
These factors do not always apply. For example, if you are trying to buy a home in a winter ski resort area or similar high-demand winter destination, these dynamics may be reversed – except for the tax implications. However, for the majority of Americans, the holidays represent an opportunity to buy a home under mostly favorable economic conditions.
The weather may still be frightful, but your opportunities to buy a home around the holidays may be just as delightful. Enjoy the holiday season as you explore your options. Don’t forget to give Santa your forwarding address!
from moneytips.com
Few people like to uproot their family and go through the stresses of home buying and moving during the holidays, but for those who do not mind, the holiday season may provide home buying bargains. Here are a few of the reasons why.
•Less Market Activity – Lots of family, school, and work activities, combined with the weather in many locations, lead to fewer real estate transactions over the holidays. Since fewer people overall are looking to buy houses, you will have less competition for your preferred house – and this gives you leverage.
Holiday home sellers often have to adjust their price downward or make other concessions if they want to sell. Keep this in mind as you search for homes. Bargains may be available, and listed prices may be more open to negotiation.
•Motivated Sellers – People who are selling their homes over the holidays often have great incentive to sell, such as an upcoming job relocation. If a house has already been on the market for some time, that incentive is multiplied.
You may be able to use this urgency to your advantage (assuming you are not in a similarly urgent need to buy). Negotiate fairly but firmly with sellers and you should be able to extract a lower price and/or other concessions like paying part of the closing costs.
•Potential Tax Advantages – If you itemize your taxes, you can deduct any points you paid upon closing, as well as property taxes and mortgage interest. Whether it is to your advantage to buy before or after year’s end depends on factors such as how many other deductions you have this year and expect to have next year.
It is best to consult with a tax professional before purchase. Even though you do not want to make a decision on a home purchase strictly for tax reasons, it could be to your benefit to close before the end of the year.
•Better Interest Rates – Within the general trend of interest rates, there is often a cyclical trend of lower interest rates during the holidays – not from the generosity of lenders but due to limited demand forcing greater competition among lenders.
There are plenty of factors that can obscure or swamp this cycle, but in general, you should see preferable interest rates around the holidays compared to the times immediately before or after.
•Faster Closings – Generally, all parties involved have incentive to complete transactions toward the end of the year. Lenders want to close their books, real estate agents want to receive their commissions before the year closes, sellers want to move on to their new home and settle in for the holidays – and just like the sellers, you want to settle in as well.
Since all parties are motivated and there are fewer transactions taking place during this time, it should be easier to put everything in place for a smooth and rapid closing.
These factors do not always apply. For example, if you are trying to buy a home in a winter ski resort area or similar high-demand winter destination, these dynamics may be reversed – except for the tax implications. However, for the majority of Americans, the holidays represent an opportunity to buy a home under mostly favorable economic conditions.
The weather may still be frightful, but your opportunities to buy a home around the holidays may be just as delightful. Enjoy the holiday season as you explore your options. Don’t forget to give Santa your forwarding address!
Top 10 Tips for Selling Your Home During the Holidays
from hgtv.com
The holiday season from November through January is often considered the worst time to put a home on the market. While the thought of selling your home during the winter months may dampen your holiday spirit, the season does have its advantages: holiday buyers tend to be more serious and competition is less fierce with fewer homes being actively marketed. First, decide if you really need to sell. Really. Once you've committed to the challenge, don your gay apparel and follow these tips from FrontDoor.
1.Deck the halls, but don’t go overboard.
Homes often look their best during the holidays, but sellers should be careful not to overdo it on the decor. Adornments that are too large or too many can crowd your home and distract buyers. Also, avoid offending buyers by opting for general fall and winter decorations rather than items with religious themes.
2.Hire a reliable real estate agent.
That means someone who will work hard for you and won't disappear during Thanksgiving, Christmas or New Year's. Ask your friends and family if they can recommend a listing agent who will go above and beyond to get your home sold. This will ease your stress and give you more time to enjoy the season.
3.Seek out motivated buyers.
Anyone house hunting during the holidays must have a good reason for doing so. Work with your agent to target buyers on a deadline, including people relocating for jobs in your area, investors on tax deadlines, college students and staff, and military personnel, if you live near a military base.
4.Price it to sell.
No matter what time of year, a home that’s priced low for the market will make buyers feel merry. Rather than gradually making small price reductions, many real estate agents advise sellers to slash their prices before putting a home on the market.
5.Make curb appeal a top priority.
When autumn rolls around and the trees start to lose their leaves, maintaining the exterior of your home becomes even more important. Bare trees equal a more exposed home, so touch up the paint, clean the gutters and spruce up the yard. Keep buyers’ safety in mind as well by making sure stairs and walkways are free of snow, ice and leaves.
6.Take top-notch real estate photos.
When the weather outside is frightful, homebuyers are likely to start their house hunt from the comfort of their homes by browsing listings on the Internet. Make a good first impression by offering lots of flattering, high-quality photos of your home. If possible, have a summer or spring photo of your home available so buyers can see how it looks year-round.
7.Create a video tour for the Web.
You'll get less foot traffic during the holidays thanks to inclement weather and vacation plans. But shooting a video tour and posting it on the Web may attract house hunters who don't have time to physically see your home or would rather not drive in a snowstorm.
8.Give house hunters a place to escape from the cold.
Make your home feel cozy and inviting during showings by cranking up the heat, playing soft classical music and offering homemade holiday treats. When you encourage buyers to spend more time in your home, you also give them more time to admire its best features.
9.Offer holiday cheer in the form of financing.
Bah, humbug! Lenders are scrooges these days, but if you've got the means, then why not offer a home loan to a serious buyer? You could get a good rate of return on your money.
10.Relax — the new year is just around the corner.
The holidays are stressful enough with gifts to buy, dinners to prepare and relatives to entertain. Take a moment to remind yourself that if you don't sell now, there's always next year, which, luckily, is only a few days away.
The holiday season from November through January is often considered the worst time to put a home on the market. While the thought of selling your home during the winter months may dampen your holiday spirit, the season does have its advantages: holiday buyers tend to be more serious and competition is less fierce with fewer homes being actively marketed. First, decide if you really need to sell. Really. Once you've committed to the challenge, don your gay apparel and follow these tips from FrontDoor.
1.Deck the halls, but don’t go overboard.
Homes often look their best during the holidays, but sellers should be careful not to overdo it on the decor. Adornments that are too large or too many can crowd your home and distract buyers. Also, avoid offending buyers by opting for general fall and winter decorations rather than items with religious themes.
2.Hire a reliable real estate agent.
That means someone who will work hard for you and won't disappear during Thanksgiving, Christmas or New Year's. Ask your friends and family if they can recommend a listing agent who will go above and beyond to get your home sold. This will ease your stress and give you more time to enjoy the season.
3.Seek out motivated buyers.
Anyone house hunting during the holidays must have a good reason for doing so. Work with your agent to target buyers on a deadline, including people relocating for jobs in your area, investors on tax deadlines, college students and staff, and military personnel, if you live near a military base.
4.Price it to sell.
No matter what time of year, a home that’s priced low for the market will make buyers feel merry. Rather than gradually making small price reductions, many real estate agents advise sellers to slash their prices before putting a home on the market.
5.Make curb appeal a top priority.
When autumn rolls around and the trees start to lose their leaves, maintaining the exterior of your home becomes even more important. Bare trees equal a more exposed home, so touch up the paint, clean the gutters and spruce up the yard. Keep buyers’ safety in mind as well by making sure stairs and walkways are free of snow, ice and leaves.
6.Take top-notch real estate photos.
When the weather outside is frightful, homebuyers are likely to start their house hunt from the comfort of their homes by browsing listings on the Internet. Make a good first impression by offering lots of flattering, high-quality photos of your home. If possible, have a summer or spring photo of your home available so buyers can see how it looks year-round.
7.Create a video tour for the Web.
You'll get less foot traffic during the holidays thanks to inclement weather and vacation plans. But shooting a video tour and posting it on the Web may attract house hunters who don't have time to physically see your home or would rather not drive in a snowstorm.
8.Give house hunters a place to escape from the cold.
Make your home feel cozy and inviting during showings by cranking up the heat, playing soft classical music and offering homemade holiday treats. When you encourage buyers to spend more time in your home, you also give them more time to admire its best features.
9.Offer holiday cheer in the form of financing.
Bah, humbug! Lenders are scrooges these days, but if you've got the means, then why not offer a home loan to a serious buyer? You could get a good rate of return on your money.
10.Relax — the new year is just around the corner.
The holidays are stressful enough with gifts to buy, dinners to prepare and relatives to entertain. Take a moment to remind yourself that if you don't sell now, there's always next year, which, luckily, is only a few days away.
Colorado Chateau in the Sky
from denverpost.com
$17.5 million Chateau V in Evergreen is a mansion modeled after the historic Biltmore Estate
Windows and terraces in the 16,817-square-foot castle take full advantage of Mount Evans views
A Massive Castle in Colorado Seeks $17.5 Million
WHAT: 600 Chateau V Road is a six-bedroom mansion with six full bathrooms and two half baths. It’s situated on 35 acres in Evergreen, near the Clear Creek County line.
PRICE: At $17.5 million — $1,041 per square foot — it is the “largest residential undertaking” in the Evergreen/Conifer area, according to LIV Sotheby’s International‘s listing. The taxes alone are around $30,000 a year.
SIZE: 16,817 square feet
LOCATION: The drive to this location from Evergreen Lake winds up historic estate-lined Upper Bear Creek Road. After about 5 miles of creek-hugging curves, the road opens up to a valley of soft green meadows and a postcard-perfect view of Mount Evans, which seems so close that you could touch it. The area has historically included a mix of ranches, cabins and modest homes, but newly built, sprawling mansions have made Upper Bear Creek one of the most desirable locations on the Front Range. Access to the 74,000-acre Mount Evans Wilderness is just up the road, a true Rocky Mountain destination for hunters, anglers, hikers and backcountry campers. This property is on the edge of the Jefferson County/Clear Creek County line.
ABOUT THE HOUSE: Completed in 2015 after nine years of construction, this limestone Châteauesque mansion was modeled after the 19th century Biltmore House in Asheville, N.C. Chateau V has all the accoutrements of a real castle: stained and diamond-cut glass at every turn, wrought iron accents, 126 chandeliers, 25-foot ceilings in the great room, four fireplaces (including one enjoyable from an outdoor deck), a wine cellar, a library, bubble balconies, a porte-cochere and an in-law suite. But the most jaw-dropping feature is the view to the west of Mount Evans, visible from every elegant terrace.
$17.5 million Chateau V in Evergreen is a mansion modeled after the historic Biltmore Estate
Windows and terraces in the 16,817-square-foot castle take full advantage of Mount Evans views
A Massive Castle in Colorado Seeks $17.5 Million
WHAT: 600 Chateau V Road is a six-bedroom mansion with six full bathrooms and two half baths. It’s situated on 35 acres in Evergreen, near the Clear Creek County line.
PRICE: At $17.5 million — $1,041 per square foot — it is the “largest residential undertaking” in the Evergreen/Conifer area, according to LIV Sotheby’s International‘s listing. The taxes alone are around $30,000 a year.
SIZE: 16,817 square feet
LOCATION: The drive to this location from Evergreen Lake winds up historic estate-lined Upper Bear Creek Road. After about 5 miles of creek-hugging curves, the road opens up to a valley of soft green meadows and a postcard-perfect view of Mount Evans, which seems so close that you could touch it. The area has historically included a mix of ranches, cabins and modest homes, but newly built, sprawling mansions have made Upper Bear Creek one of the most desirable locations on the Front Range. Access to the 74,000-acre Mount Evans Wilderness is just up the road, a true Rocky Mountain destination for hunters, anglers, hikers and backcountry campers. This property is on the edge of the Jefferson County/Clear Creek County line.
ABOUT THE HOUSE: Completed in 2015 after nine years of construction, this limestone Châteauesque mansion was modeled after the 19th century Biltmore House in Asheville, N.C. Chateau V has all the accoutrements of a real castle: stained and diamond-cut glass at every turn, wrought iron accents, 126 chandeliers, 25-foot ceilings in the great room, four fireplaces (including one enjoyable from an outdoor deck), a wine cellar, a library, bubble balconies, a porte-cochere and an in-law suite. But the most jaw-dropping feature is the view to the west of Mount Evans, visible from every elegant terrace.
How Trump's Presidency Could Impact Real Estate
food for thought from forbes.com
How will the real estate market be impacted by Donald Trump’s victory and Republicans controlling both chambers of Congress? Though Mr. Trump is a real estate man, his policy platform has been largely vague on real estate proposals. Here is Forbes thoughts on how certain real estate issues may play out under President Trump and of their potential impact to consumers.
1. There will no doubt be a short-term stimulus to the economy. A combination of tax cuts and government spending in the form of upgrading nation’s infrastructure and for national defense will provide a short boost to the economy in the first half of 2017. Inflation will likely kick a bit higher from a faster GDP growth and that will lead to modestly higher interest rates. Accompanying gains in consumer confidence will further move the economy higher. Should the faster GDP growth be sustained and arise out of higher productivity, then inflation will be manageable. Moreover, more jobs will automatically mean more tax revenue, which will lessen budget deficit. Should, however, the stimulus impact give only a short term boost and not be durable then a much larger budget deficit will force interest rates notably higher. The future generation will be saddled with more debt.
2. The trade deficit will surely rise in 2017. That’s because a growing economy will allow Americans to drink more Italian wine, drive German sports cars, watch Korean dramas, and play Japanese game consoles. More vacation trips to Cancun and London are also likely. These activities always happen when consumers regain confidence about their financial well-being. Should tariffs be raised to lessen the trade deficit, consumers will face higher prices. If exports and imports significantly decline, then history has repeatedly shown that recession and job cuts soon follow. Most economists believe job training and re-training via community colleges are much better ways to help those who lose jobs from technological automation and from international trade.
3. There will be more gyrations in the stock market. Wall Street will cheer because of less government regulation but will frown on restrictive international trade policies. The current leader of the Federal Reserve, Janet Yellen, may be asked to step down and this perceived intrusion into what should be an independent institution may be viewed by the financial market as unsettling. Perhaps Mr. Trump relishes in his unpredictability. But the rise of uncertainty in the financial market will hold back corporate investment spending decisions. History says that economic dynamism thrives on the rule of law and not on whims of policy uncertainty. Institutions of law matter much more than any one person or a group of people.
4. Changes to Dodd-Frank financial regulation will occur in some form. A clear positive would be the lifting of compliance costs imposed on small-sized banks. Around 10,000 local and community banks have traditionally been the source of funding for construction and land development loans. With less regulatory burden, these small banks can make more loans and will boost home building activity – something that is needed in the current housing shortage situation. But changes to financial regulations on large banks like Goldman Sachs and Wells Fargo could again lead us back to the days of cowboy capitalism and consequent exposure to a massive taxpayer bailout.
5. There could be a move away from stringent mortgage underwriting to more normal lending. Credit is still tight for mortgages as evidenced by very high credit scores among those who are getting approved. An important reason for overly-conservative lending is due to the exposure of random lawsuits by the government on lending institutions in recent years. To the degree that the Trump Administration makes it very clear as to what is and what is not an infraction then more mortgages will be provided to consumers. Should the Trump Administration create an environment of “we will sue you” then the lending institutions will retrench and shut off mortgage access to many consumers.
6. There could be less regulatory land-use and zoning burden for home construction, and thereby lower the cost of building. In recent years, newly constructed home prices have been much higher than existing home prices. Homebuilders say that is due to all the extra cost of regulation and not necessarily from higher input cost of lumber, cement, and worker wages. President Obama’s economists in fact wrote a white paper on the topic of lifting this burden. President Trump will likely try to move this issue – though jurisdictional issues of federal versus local will be contested.
7. Fannie Mae and Freddie Mac may not survive. This would be most unfortunate. Let me be clear, these two institutions made horrendous business decisions in the past to buy subprime mortgages, create an internal hedge fund, and be led by political players in an attempt to serve political goals. That mistake cost hundreds of billions of taxpayer dollars. Fortunately, after management changes Fannie and Freddie today are led by technicians providing a government guarantee on soundly-written mortgages. As a result, they have repaid all the taxpayer bailout money. Moreover, they are doing so well financially given the very low mortgage default rates, that the U.S. Treasury is getting added revenue on the backs of responsible homeowners. If anything, the guarantee fees are too high and should be reduced. If Washington’s instinct is to eliminate Fannie and Freddie because of their past sins from past managers, then mortgages will be much more expensive with 30-year fixed rate products disappearing from the market place. Consider: mortgage lending on commercial real estate collapsed by over 90% a few years ago during the financial market crisis because there are no government guarantees for this product. Imagine what the housing market would be like if there was an equivalent crash of 90% reduction in home buying. We should view supporting Fannie and Freddie in the same way as we view supporting FDIC deposit government guarantee at banks – to help smooth the financial market.
8. Community colleges are likely to get more help. That is because we need more workers with trade skills such as welders, plumbers, bricklayers, electricians, nurse assistants, and x-ray technicians. Some of these graduates will go into building homes and commercial real estate development. Interestingly, even though Mr. Trump and Secretary Clinton refused to shake hands, they both agreed on the greater role of community colleges in today’s economy.
9. Homeowners in flood zones and who suffer through natural disasters may get much less relief from the government. Currently this federal program to assist in wild fires, hurricanes, earthquakes, and other natural disasters is $24 billion in the hole. The government instinct could be to reduce government’s role and have homeowners pay more. All risks should no doubt be properly priced. But the current flood map for federal insurance coverage is totally outdated and not useful. Rather than lessen the coverage on federal insurance more efforts should be made on updating the maps so a better risk assessment can be made.
10. There will be active discussions on tax reform. The goal would be to simplify. Currently, the U.S. tax code is said to be thicker than the Bible – but without any of the good news. In simplifying, there could be a trimming of the mortgage interest deduction, reducing property tax deduction, and cutting of exemptions on capital gains from the sale of a home. Moreover, for commercial real estate practitioners, the like-kind exchange tax deferral (also known in the industry as 1031) could easily be on the chopping block. Research has consistently shown how valuable these tax preferences are for homeownership, in protecting private property rights, and for economic growth. People in real estate and property owners across the country should therefore be on alert about any policy discussion on these matters.
One particular aspect of the tax code of note with President Trump will be about commercial real estate depreciation. That is because Mr. Trump has said he used this depreciation to not pay any taxes. How exactly one gets such a bigly write-off to be able to not pay personal income for many years is not clear and will likely be never be known because his tax filings will not be disclosed. But the attention to this depreciation will be there. In long days past, many wealthy doctors, lawyers, and other high income professionals bought real estate at the recommendation of their tax advisors to lower their tax obligation. But in 1986, a new tax code prevented these “passive losses” of depreciation. It initially also tried to limit depreciation to real estate investors who are active in the real estate business. That would have been equivalent to not being able to depreciate expensive medical equipment by doctors in their business. Makes no sense. That is why the National Association of REALTORS made it known that depreciation should be allowed as an “active loss” for those who practice real estate as their profession. The current tax code makes this distinction, and is unlikely to be on the chopping block in the tax reform discussion.
There will plenty of other issues in discussion that will also impact real estate. What to do about the tripling in student debt over the past decade? Immigration restrictions on home buying? EPA’s policy on land use? Drones? Lead paint? The Fair Housing Act? Stay tuned. In the meantime, let’s hope that Mr. Trump can surprise positively as only he can do. If he can somehow unite and rouse the country of “Making America Great Again” and significantly alter confidence and behavior then the economy can grow just from the positive outlook and will not cost taxpayer an ounce of extra penny. That would be the best scenario.
How will the real estate market be impacted by Donald Trump’s victory and Republicans controlling both chambers of Congress? Though Mr. Trump is a real estate man, his policy platform has been largely vague on real estate proposals. Here is Forbes thoughts on how certain real estate issues may play out under President Trump and of their potential impact to consumers.
1. There will no doubt be a short-term stimulus to the economy. A combination of tax cuts and government spending in the form of upgrading nation’s infrastructure and for national defense will provide a short boost to the economy in the first half of 2017. Inflation will likely kick a bit higher from a faster GDP growth and that will lead to modestly higher interest rates. Accompanying gains in consumer confidence will further move the economy higher. Should the faster GDP growth be sustained and arise out of higher productivity, then inflation will be manageable. Moreover, more jobs will automatically mean more tax revenue, which will lessen budget deficit. Should, however, the stimulus impact give only a short term boost and not be durable then a much larger budget deficit will force interest rates notably higher. The future generation will be saddled with more debt.
2. The trade deficit will surely rise in 2017. That’s because a growing economy will allow Americans to drink more Italian wine, drive German sports cars, watch Korean dramas, and play Japanese game consoles. More vacation trips to Cancun and London are also likely. These activities always happen when consumers regain confidence about their financial well-being. Should tariffs be raised to lessen the trade deficit, consumers will face higher prices. If exports and imports significantly decline, then history has repeatedly shown that recession and job cuts soon follow. Most economists believe job training and re-training via community colleges are much better ways to help those who lose jobs from technological automation and from international trade.
3. There will be more gyrations in the stock market. Wall Street will cheer because of less government regulation but will frown on restrictive international trade policies. The current leader of the Federal Reserve, Janet Yellen, may be asked to step down and this perceived intrusion into what should be an independent institution may be viewed by the financial market as unsettling. Perhaps Mr. Trump relishes in his unpredictability. But the rise of uncertainty in the financial market will hold back corporate investment spending decisions. History says that economic dynamism thrives on the rule of law and not on whims of policy uncertainty. Institutions of law matter much more than any one person or a group of people.
4. Changes to Dodd-Frank financial regulation will occur in some form. A clear positive would be the lifting of compliance costs imposed on small-sized banks. Around 10,000 local and community banks have traditionally been the source of funding for construction and land development loans. With less regulatory burden, these small banks can make more loans and will boost home building activity – something that is needed in the current housing shortage situation. But changes to financial regulations on large banks like Goldman Sachs and Wells Fargo could again lead us back to the days of cowboy capitalism and consequent exposure to a massive taxpayer bailout.
5. There could be a move away from stringent mortgage underwriting to more normal lending. Credit is still tight for mortgages as evidenced by very high credit scores among those who are getting approved. An important reason for overly-conservative lending is due to the exposure of random lawsuits by the government on lending institutions in recent years. To the degree that the Trump Administration makes it very clear as to what is and what is not an infraction then more mortgages will be provided to consumers. Should the Trump Administration create an environment of “we will sue you” then the lending institutions will retrench and shut off mortgage access to many consumers.
6. There could be less regulatory land-use and zoning burden for home construction, and thereby lower the cost of building. In recent years, newly constructed home prices have been much higher than existing home prices. Homebuilders say that is due to all the extra cost of regulation and not necessarily from higher input cost of lumber, cement, and worker wages. President Obama’s economists in fact wrote a white paper on the topic of lifting this burden. President Trump will likely try to move this issue – though jurisdictional issues of federal versus local will be contested.
7. Fannie Mae and Freddie Mac may not survive. This would be most unfortunate. Let me be clear, these two institutions made horrendous business decisions in the past to buy subprime mortgages, create an internal hedge fund, and be led by political players in an attempt to serve political goals. That mistake cost hundreds of billions of taxpayer dollars. Fortunately, after management changes Fannie and Freddie today are led by technicians providing a government guarantee on soundly-written mortgages. As a result, they have repaid all the taxpayer bailout money. Moreover, they are doing so well financially given the very low mortgage default rates, that the U.S. Treasury is getting added revenue on the backs of responsible homeowners. If anything, the guarantee fees are too high and should be reduced. If Washington’s instinct is to eliminate Fannie and Freddie because of their past sins from past managers, then mortgages will be much more expensive with 30-year fixed rate products disappearing from the market place. Consider: mortgage lending on commercial real estate collapsed by over 90% a few years ago during the financial market crisis because there are no government guarantees for this product. Imagine what the housing market would be like if there was an equivalent crash of 90% reduction in home buying. We should view supporting Fannie and Freddie in the same way as we view supporting FDIC deposit government guarantee at banks – to help smooth the financial market.
8. Community colleges are likely to get more help. That is because we need more workers with trade skills such as welders, plumbers, bricklayers, electricians, nurse assistants, and x-ray technicians. Some of these graduates will go into building homes and commercial real estate development. Interestingly, even though Mr. Trump and Secretary Clinton refused to shake hands, they both agreed on the greater role of community colleges in today’s economy.
9. Homeowners in flood zones and who suffer through natural disasters may get much less relief from the government. Currently this federal program to assist in wild fires, hurricanes, earthquakes, and other natural disasters is $24 billion in the hole. The government instinct could be to reduce government’s role and have homeowners pay more. All risks should no doubt be properly priced. But the current flood map for federal insurance coverage is totally outdated and not useful. Rather than lessen the coverage on federal insurance more efforts should be made on updating the maps so a better risk assessment can be made.
10. There will be active discussions on tax reform. The goal would be to simplify. Currently, the U.S. tax code is said to be thicker than the Bible – but without any of the good news. In simplifying, there could be a trimming of the mortgage interest deduction, reducing property tax deduction, and cutting of exemptions on capital gains from the sale of a home. Moreover, for commercial real estate practitioners, the like-kind exchange tax deferral (also known in the industry as 1031) could easily be on the chopping block. Research has consistently shown how valuable these tax preferences are for homeownership, in protecting private property rights, and for economic growth. People in real estate and property owners across the country should therefore be on alert about any policy discussion on these matters.
One particular aspect of the tax code of note with President Trump will be about commercial real estate depreciation. That is because Mr. Trump has said he used this depreciation to not pay any taxes. How exactly one gets such a bigly write-off to be able to not pay personal income for many years is not clear and will likely be never be known because his tax filings will not be disclosed. But the attention to this depreciation will be there. In long days past, many wealthy doctors, lawyers, and other high income professionals bought real estate at the recommendation of their tax advisors to lower their tax obligation. But in 1986, a new tax code prevented these “passive losses” of depreciation. It initially also tried to limit depreciation to real estate investors who are active in the real estate business. That would have been equivalent to not being able to depreciate expensive medical equipment by doctors in their business. Makes no sense. That is why the National Association of REALTORS made it known that depreciation should be allowed as an “active loss” for those who practice real estate as their profession. The current tax code makes this distinction, and is unlikely to be on the chopping block in the tax reform discussion.
There will plenty of other issues in discussion that will also impact real estate. What to do about the tripling in student debt over the past decade? Immigration restrictions on home buying? EPA’s policy on land use? Drones? Lead paint? The Fair Housing Act? Stay tuned. In the meantime, let’s hope that Mr. Trump can surprise positively as only he can do. If he can somehow unite and rouse the country of “Making America Great Again” and significantly alter confidence and behavior then the economy can grow just from the positive outlook and will not cost taxpayer an ounce of extra penny. That would be the best scenario.
Subscribe to:
Posts (Atom)
Posts
