Tuesday, July 24, 2012
Sunday, July 22, 2012
The Economy Stinks, But Housing Keeps Picking Up
By Steven Russolillo
As the broad economy continues to struggle, the housing market — one of the most beleaguered pockets of the economy for years — continues to exhibit signs that the worst is in the past.
Today’s data represent another indication confirming that mindset. U.S. home builders’ confidence registered the biggest monthly jump in nearly 10 years, another piece of evidence that housing is potentially becoming a source of strength for the economy.
Earlier Tuesday morning, the National Association of Home Builders said its housing market index jumped to 35 this month, the highest level since March 2007, and up six points from a month earlier.
‘While upcoming data on housing starts and home sales will provide a better indication of whether this surge in optimism is entirely justified, the housing market has certainly improved this year,” said Cooper Howes of Barclays. “2012 is expected to be the first year since 2005 in which residential investment will provide a positive contribution to GDP growth.”
Stocks reversed earlier losses and were firmly in positive territory. The Dow is up 85 points, the S&P 500 is up 10 points and the Nasdaq Comp is up 14 points.
KB Home is down 1.6%, DR Horton is down 1.4% and Lennar is off 1.9%. But all three of those stocks are up about 50% this year (albeit still down more than 50% from their bubble highs.)
Banks that have reported earnings throughout the last week have reported upbeat results tied to the housing market. Wells Fargo, the nation’s biggest mortgage company, said revenue from mortgage banking jumped 80% from a year earlier.
J.P. Morgan’s second-quarter mortgage-loan originations jumped 29% from a year ago. Citigroup’s quarterly results also benefited from a booming mortgage business driven by low interest rates and government programs for struggling homeowners.
Despite the upbeat homebuilder survey, analysts caution that the index is still well below historical levels. A headline reading above 50 would suggest builders are more optimistic about business conditions. The indicator hasn’t been above 50 since April 2006.
But for now, today’s results offer much needed hope on the housing front.
Tuesday, July 17, 2012
New taxes on forgiven mortgage debt to hit owners
(MoneyWatch)
Soon homeowners facing a short sale or foreclosure will have to pay
federal income tax on any portion of the loan that is forgiven unless
Congress intervenes.
The Mortgage Debt Relief Act Congress, passed in 2007, will expire at the end of the year. For the past five years, homeowners who conducted a short sale, are in foreclosure or restructured their mortgage and had part of the principal balance forgiven didn't have to pay any income tax on the forgiven debt.
But starting in 2013, homeowners who short sell their $150,000 home for $120,000 will have to pay taxes on the $30,000 worth of debt that was forgiven, because the federal government considers it income, even though homeowners never actually put any of this "phantom" income in their pockets.
Will short sales save the housing market?
Lawmakers push bill to help homeowners refinance
9 ways to get the mortgage of your dreams
The legislation was initially passed to help homeowners struggling to pay their mortgage when the housing market crisis first began. But the market is still far away from recovery and real estate agents and legislators alike have argued that homeowners are still struggling and need relief.
"Homeowners facing a short sale or foreclosure are already in financial distress and are most likely unable to pay additional taxes," said Moe Veissi, president of the National Association of Realtors, in an e-mail. "These individuals have suffered through an economically devastating short sale or foreclosure of their home, and in many instances are unable to pay additional taxes, which only adds to their overall burden."
NAR is lobbying Congress to extend the tax relief past the 2012 deadline. Several legislators have introduced bills in both the House and Senate that would extend the tax relief.
The senate bill introduced by Democratic Senator Debbie Stabenow of Michigan would extend tax relief through 2013, while a House bill sponsored by Republican Representative Tom Reed of New York would extend the relief a year and another bill sponsored by Democratic Representative Charles Rangel, also of New York, would extend it two more years.
Though the three bills vary on how long they will continue the tax relief, they are all nearly identical in their goal to keep forgiven debt from a short sale, foreclosure or refinancing untaxed. All three bills have gone to committee. If the House and Senate are unable to come to an agreement, millions of homeowners could potentially wind up paying income tax on their mortgage deficiencies.
The Mortgage Debt Relief Act Congress, passed in 2007, will expire at the end of the year. For the past five years, homeowners who conducted a short sale, are in foreclosure or restructured their mortgage and had part of the principal balance forgiven didn't have to pay any income tax on the forgiven debt.
But starting in 2013, homeowners who short sell their $150,000 home for $120,000 will have to pay taxes on the $30,000 worth of debt that was forgiven, because the federal government considers it income, even though homeowners never actually put any of this "phantom" income in their pockets.
Will short sales save the housing market?
Lawmakers push bill to help homeowners refinance
9 ways to get the mortgage of your dreams
The legislation was initially passed to help homeowners struggling to pay their mortgage when the housing market crisis first began. But the market is still far away from recovery and real estate agents and legislators alike have argued that homeowners are still struggling and need relief.
"Homeowners facing a short sale or foreclosure are already in financial distress and are most likely unable to pay additional taxes," said Moe Veissi, president of the National Association of Realtors, in an e-mail. "These individuals have suffered through an economically devastating short sale or foreclosure of their home, and in many instances are unable to pay additional taxes, which only adds to their overall burden."
NAR is lobbying Congress to extend the tax relief past the 2012 deadline. Several legislators have introduced bills in both the House and Senate that would extend the tax relief.
The senate bill introduced by Democratic Senator Debbie Stabenow of Michigan would extend tax relief through 2013, while a House bill sponsored by Republican Representative Tom Reed of New York would extend the relief a year and another bill sponsored by Democratic Representative Charles Rangel, also of New York, would extend it two more years.
Though the three bills vary on how long they will continue the tax relief, they are all nearly identical in their goal to keep forgiven debt from a short sale, foreclosure or refinancing untaxed. All three bills have gone to committee. If the House and Senate are unable to come to an agreement, millions of homeowners could potentially wind up paying income tax on their mortgage deficiencies.
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