Pensacola, FL Real Estate ~ blog

Recession and Expansion

There are times when the economy is brisk and everyone feels confident about his or her prospects for the future. As a result, they spend money. People eat out more, buy new cars, and….

…they buy new homes.

Then, for one reason or another, the economy slows down. Companies lay off employees and consumers are more careful about where they spend money, perhaps saving more than usual. As a result, the economy decelerates even further. If it slows enough, we have a recession.
During such a time, fewer people are buying homes. Even so, some homeowners find themselves in a situation where they must sell. Families grow beyond the capacity of the home, employees get relocated, and some may even find themselves unable to make their mortgage payment - perhaps because of a layoff in the family.

Supply and Demand

When the supply of available houses is greater than the supply of buyers, appreciation may slow and prices may even fall, as happened in the early eighties and the early to mid-nineties.

If you are lucky enough to purchase a home during a slow period, you can be reasonably certain the economy will begin to show strength again. At times, real estate values may even surge drastically. In
many regions of the country, this is precisely what occurred in the late eighties and nineties.

Should You Try to “Time the Market”?

One problem with attempting to time your purchase to the business cycle is that no one can accurately predict the future. Another challenge is that interest rates are generally higher during a depressed market and income may not be keeping up. For that reason, fewer people can qualify for a home purchase than in more prosperous times.

Why You Should Not Wait

Plus, this strategy generally works best for first-time buyers. People who already have a home usually need to sell it in order to buy their next one. If a “move-up” buyer wants to buy a home during a depressed market, that means they usually have to sell one during the slow market, too. If a seller wants to sell his home to take advantage of a “hot” market when prices are fairly high, they generally have to buy their next home during that same hot market.

It tends to equal out.

Finally, the business cycle can change over time. Since 1983, we have had two fairly long expansions with only a slight recession in between each. You would not want to wait nine years to buy a home, would you? You could miss out on a substantial amount of appreciation by waiting, and end up paying much higher prices.

Beginning on November 1, ECUA began their annual “sewer averaging”. ECUA uses this two-month sewer averaging period to evaluate your water consumption and uses that information for billing of your sewage for the entire coming year.

Since your water consumption during this period will determine your sewage bill for the next year, it is advisable to reduce water consumption to a minimum.

Tips for reducing water consumption are:
1) Take showers instead of baths.
2) Wash your vehicle at a car wash facility rather than at your residence.
3) Check all faucets and toilets for leaks. You can determine if your toilet is leaking by placing a few drops of food coloring in the water tank, then check back in 10 minutes to see if the color has leaked into the toilet bowl. If the toilet bowl water changes colors, then it is time to repair the water tank.

We should all be aware of our water consumption at all time and be as conservative as possible, but this is the one time of the year where it pays to pay extra attention to your water consumption, so you don’t end up paying extra out of your pocketbook all year long.

Please note that People’s Water customer’s averaging begins November 10.

What: H.R. 3221 - Housing and Economic Recovery Act of 2008.

Amount of Credit: Ten percent (10%) of cost of home; not to exceed $7,500 for total credit

Eligible Property: Any single-family residence (including condos, coops) that will be used as a principal residence.

Refundable: Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.

Income Limit: Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively).

First-time Homebuyer Only: Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.

Recapture: Yes. Portion (6.67% of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale.

Effective Date: Purchases on or after April 9, 2008.

Termination: July 1, 2009

Interaction with Alternative Minimum Tax: Can be used against AMT, so credit will not throw individual into AMT.

Fri Sep 26 – Sun Sep 28

The Fiesta of Five Flags presents the Pensacola Seafood Festival on the fourth weekend of September in historic Seville Square area in downtown Pensacola. You and your family can enjoy delicious fruits of the sea at this outstanding event which has been consistently recognized as one of the Top 20 festivals in the Southeast by the Southeast Tourism Society.

http://www.fiestaoffiveflags.org/SeafoodFestival/index.html

Free Admission and Parking

Saturday, October 11, 2008 from 10am-4pm

Corner of 9th Ave & Chase ST

Law Enforcement - Fire Service - EMS

Live Demonstrations, Food, Fun Activities, and Static Displays

As summer is nearing an end and fall is right around the corner, it is time to start thinking about your household heater.

If you are one of the many who use a gas heater in your home and shut your pilot light off over the summer in order to conserve on gas, then now is the time to to light it back up.

If you do shut your pilot light off, then consider taking advantage of ESP’s free winter pilot lighting. Call before October 31 to schedule and it is FREE. Call ESP at 850-474-5300.

1. What are your qualifications? Are you a member of the American Society of Home Inspectors or National Associaton of Home Inspectors?

2. Do you have a current license? Inspectors are not required to be licensed in every state.

3. How many inspections of properties such as this do you do each year?

4. Do you have a list of past clients I can contact?

5. Do you carry professional errors and omission insurance? May I have a copy of the policy?

6. Do you provide any guarantees of your work?

7. What specifically will the inspection cover?

8. What type of report will I receive after the inspection?

9. How long will the inspection take and how long will it take to receive the report?

10. How much will the inspection cost?

Portions adapted from Real Estate Checklists and Systems and used with permission.

1. Property disclosure form. This form requires you to reveal all known defects to your property. Check with your state government to see if there is a special form required in your state.

2. Purchasers access to premises agreement. This agreement sets conditions for permitting the buyer to enter your home for activities such as measuring for draperies before you move.

3. Sales contract. The agreement between you and the seller on terms and conditions of sale. Again, check with your state real estate department to see if there is a required form.

4. Sales contract contingency clauses. In addition to the contract, you may need to add one or more attachments to the contract to address special contingencies — such as the buyer’s need to sell a home before purchasing yours.

5. Pre- and post-occupancy agreements. Unless you’re planning on moving out and the buyer moving in on the day of closing, you’ll need an agreement on the terms and costs of occupancy once the sale closes.

6. Lead-based paint disclosure pamphlet. If your home was built before 1978, you must provide the pamphlet to all sellers. You must also have buyers sign a statement indicating they received the pamphlet.

The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works.

Assume:

$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______

$12,577 = Total deduction

Then, multiply your total deduction by your tax rate.

For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56

$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level. Speak to your tax accountant regarding your personal benefit of homeownership.

1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.

2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.

3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.

4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.

5. Predictability. Unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.

6. Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.

7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

Online resources: To calculate whether buying is the best financial option for you, use the “Buy vs. Rent” calculator at www.GinnieMae.gov.