Many consumers comment that some realtors as well as some economists seem confused about the future of housing sales. They point out that sometimes we seem bullish and sometimes we seem bearish. Let’s set the record straight about this.
Whether the Highlands housing market is likely to be up or down in the future is based on how many people decide to buy homes. Their decisions are based on a myriad of personal factors such as health concerns, whether they are close to retirement, whether they need or want a second home, whether they can afford to buy and so on.
Their views are also affected by tax credits, home prices, mortgage rates and a host of other factors out of their control. In short there are more than a few variables.
What do we think? Going back over 30 years shows that one consistent barometer is the “5%” rule. That is over 30 years of data shows that roughly 5% of all households tend to buy a new or existing home each year. (Note: in 2005 the percentage had reached 7.2% or 44% ABOVE the sustainable long term rate.) On that basis, and given approximately 120 million households in the U.S. then “normal” housing sales should be around 6 million for this year. And given where we are at the start of June, that seems to be where we will finish.
In short, we are bullish about a solid if not spectacular year for housing sales.
There’s also been some confusion about how the new health care bill may affect real estate. First, there is no 4% “sales tax” or “transfer tax” on the sale of a home included in the health care bill. Additionally, there is nothing in the bill that impacts the mortgage interest deduction. What was included in the health bill is a provision that imposes a new 3.8% Medicare tax for some high income households that have “net investment income”. Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.
This new tax would only apply to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.
The calculations of how much tax is owed are complex. However, even when the AGI limits are met, the new tax would not be applied to all capital gains that result from the sale of a home since the existing home sale capital gains exclusion rule still applies. So if the gain from the sale of the primary residence is below $250,000 (individual)/$500,000 (couple) then no Medicare tax will have to be paid on the gain. The new Medicare tax would only apply to any home sale gain realized in excess of the $250K/$500K existing primary home exclusion that pushes the filer’s AGI over the $200K/$250K income limits. The new Medicare tax will take effect January 1, 2013. Of course, you need to check with your own tax professional to see how the new health care reform bill can affect your bottom line.
For more information on real estate in Highlands, contact Judy Michaud at Meadows Mountain Realty 828-526-1717 or toll free 866-526-3558. Please feel free to stop by our office across the street from “Sweet Treats” at 450 N. 4th Street in Highlands or at 94-1 Highway 64 West in Cashiers. Or visit us online at www.meadowsmtnrealty.com Judy can also be reached by email at info@meadowsmtnrealty.com
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If you are thinking about renovating your Cashiers real estate there couldn’t be a better time. Interest rates are low, there is a surplus of materials (driving prices down), and contactors are vying for work which is making their costs less expensive than they have been in years. In other words, if you have the money or the means to borrow the money, renovating your Cashiers home today could make sense.
