Winter 2015 Real Estate Update

February 12th, 2015

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Home Prices The National Median Sales Price of all homes sold in December was $196,000. This was 0.5% higher than the median price in November, and 5.9% above the median price seen in December 2013.

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Sales Chart

On a year-over-year basis, the Median Sales Price has now risen for 35 consecutive months. Because inventory has generally moved in a positive direction this year and demand has been slightly below 2013 levels, home prices have not been rising as rapidly as last year. In December 2013, prices were growing more than twice as fast, at 11.9% year-over-year. Among the 53 metro areas surveyed, 43 reported higher sales prices than one year ago.

Year End Home Sales Bounce Back Defying the normal trend, home sales in December rose above the number of November sales by a significant 14.4%. Sales were also 3.9% above those of last December.

Although home sales have generally been lower in 2014 than 2013, three of the last four months have experienced sales higher than the same month last year. Home prices in December were also higher than one year ago, rising 5.9%.

Inventory continues to be constrained, with 10.7% fewer homes for sale than last December. As a result, the Months Supply of inventory rose to 5.7 on a scale where 6.0 indicates a market balanced equally between buyers and sellers.


1031 Exchange

When selling investment property, sellers will often involve themselves in a 1030 EXCHANGE to defer tax consequences.

Get the Boot Out!        

From Kevin Hummel, CES® McFerran Law, P.S.

One Penny More than the Sale Many investors have the notion that they must purchase replacement property that is “at least one penny more than their sale property,” which is not completely wrong, but this is certainly not the whole story.

When investors purchase something less than the property they are selling, taxes may have to be paid on the difference. This portion is commonly referred to as “boot.”

The Exchange Value In order to defer all capital gains on the sale, in the purchase be equal to or greater than the “Exchange Value.” That value is the sales price, minus closing costs.  Closing costs are things like commissions, escrow fees, title insurance and in Washington State, excise tax. It could also include other closing costs that have been agreed upon in the Purchase & Sale Agreement.

Keep in mind that closing costs do not include any expenses that would have had to be paid if the property were not being sold. In other words, if the fence was replaced before the property was listed, it is not a closing cost. On the other hand, if buyer and seller agreed in the contract to fix the fence before closing on the sale, it is a closing cost, especially if it is paid for out of the escrow.

Boot If the seller does pull cash out of an exchange and pay taxes on that portion, it is called “boot.” If it is a partial exchange, the difference between the Exchange Value and what is spent on the replacement is also called boot. Boot could also be paid if the seller asks escrow to pay for items that should be handled outside the transfer of real estate, like rent pro-rations, tenant deposits, or any other charges unrelated to the closing. Sellers of investment properties will want to watch all of those closely to find any that should be of concern.

Where Did That Name “Boot” Come From? The stories differ, a favorite is the one that talks about a Southern Senator who was trying to understand these rules. Reportedly, with a Southern drawl, he said, “You mean you can buy some real estate, and get some cash to boot?” Although it is not written that into the tax code, the IRS commonly uses that term in their writing and Publications.

A Complete Exchange Again, just to be clear, in order to defer all capital gains, sellers must:

  • Purchase equal or greater than the exchange value;
  • Use all of the proceeds from the sale towards the purchase of replacement property;
  • Replace any debt paid off in the sale of the Relinquished property.

So, following those three basic rules, will help successfully defer all capital gains.

Please give me a call at 253-307-4505 if you would like more information about 1031 exchanges.


Good News/Bad News               Excerpted from the National Association of Realtors

Thumbs Up xGood NewsCongress Extended the Forgiveness of Debt Tax Relief Act!!!

Thumbs Down xBad NewsIt appears that it was only extended to the end of December 2014! ​That law allowed most of our sellers who were completing short sales to eliminate any need to pay tax on any amounts of debt being forgiven by the lender (or lenders).

It wasn’t until the December’s  “lame duck” session that this bill came up for a vote that would allow this favorable law to be further extended. Actually, this bill was attached along with about 50 odd other favorable tax bills into a package.

All the details are still being worked out in Congress. We had hoped for an extension through the end of 2015, but that does not appear to be on the horizon.

This is certainly not the best news, but I guess it is frosting on the cake for sellers who  completed  a short sale transaction by December 31st​ 2014.


                       Gig Harbor Snapshot                                                             

       12–Month Average Sale Price (Residential)         

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                         Tacoma Snapshot             

12– Month Average Sale Price (Residential)

            Tacoma Chart


Right Now, Millenials Are the Housing Market         

From Jacob Davidson, a reporter with Money

According to Zillow’s data, young married couples in which both partners work currently own homes at a rate close to or above historical norms for their demographic. Even single employed millennials are slightly more likely to own a home than their counterparts in the ’70s, ’80s, and ’90s. So if young adults want homes more than previous generations, why is their homeownership rate at a historic low? The answer is that millennials are getting married later in life, and not having two income streams makes it much harder to scratch together a down payment.

Recently, Zillow reported that the number of Americans living with roommates or adult family members jumped to more than a third of U.S. adults in 2012, up from 27.4% in 2006, a new report from Zillow said.

As a result, a total of 5.4 million households have been lost to doubling up as housing costs outpaced income over the last decade.

“But there is a silver lining behind this data. Like a coiled spring, all of these doubled-up households represent tremendous potential energy for the market. If and when these compressed households begin to unwind and these millions of Americans do start to create their own households, demand will bounce back, possibly even causing household growth to outpace population growth,” Humphries added.


Hot Housing Trends for 2015   

From article by Barbara Ballinger, freelance writer and author

Which way they’ll go is hard to predict, but here are [some] trends that experts expect to draw great appeal this year:

  1. Freestanding tubs
  2. Quartzite counter tops
  3. Porcelain floors (for entries and high-traffic areas)
  4. Charging stations (for all your technology)
  5. Multiple master suites
  6. Fireplaces and fire pits
  7. Upscale garages (temperature control, pet-washing shower, built-in storage, epoxy floors)
  8. Keyless entry
  9. Water conservation (permeable pavers, low or no-mow grasses, drought-tolerant plants)
  10. Return to human scale (smaller kitchens, one set of appliances, fewer counter tops, smaller islands)
  11. Shades-of-white kitchens
  12. Outdoor living (outdoor showers next to hot tubs, private dog runs, better-equipped roof decks)

What Should You do in this market?

Whether you are a Seller, a Buyer or an Investor, there are lots of good opportunities in today’s market. I’m always available to consult with you to help you assess and achieve your real estate goals.

Barbara Magnuson     253-307-4504


 

 

 

 

 

 

 

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Contact Barb Magnuson

Magnuson Residential & Commercial Properties
Keller Williams Realty - West Sound
11515 Burnham Drive NW, Gig Harbor, WA 98332
(253) 307-4505
(253)851-4511
(253) 857-8700

barbmagnuson@gmail.com

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