Construction on new U.S. homes soared last month to the fastest pace since early 2008, signaling that the housing market’s recovery is shaking off rising mortgage rates, according to government data released this week. Housing starts leaped 22.7% in November, backed by surges for both single-family homes and apartments, the U.S. Department of Commerce said.
Builders, meanwhile, are becoming increasingly perky, with a gauge of their views on present sales of single-family homes recently hitting the highest level since 2005, according to the National Association of Home Builders and Wells Fargo. In fact, builder confidence is climbing so quickly that it is outpacing actual construction rates for single-family homes.
Even the Federal Reserve’s announcement this week that it is tapering the asset purchases that have exerted downward pressure on long-term rates didn’t shake home-builder stocks.
What’s behind the cheery outlook among builders and their investors? Perhaps, like our central bankers, they are increasingly confident in the economy’s strength. If healthy jobs growth continues, homeownership should also pick up, benefitting new construction.
Builders also have a lot of room to expand: Housing starts hit a seasonally adjusted annual rate of 1.09 million in November, far below the 1.7 million starts per year that economists say are needed to maintain current stock and meet demand for replacement and second homes. Indeed, there’s enough demand that builders have been able to raise prices, though recent data signal that this trend is curbing sales.
Friday, December 20, 2013
Wednesday, December 11, 2013
Tax Benefits of Owning a Home
They say there are only two things you can count on
in this world: death and taxes. But when it comes to owning a home, it appears
there may be a third. And that is the favorable treatment of home ownership
by the Internal Revenue Service.
1. The purchase
When buying your own home, most of the expenses are not tax deductible. But there is one exception that is worth finding.
The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for "daily interest" between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement.
Much more importantly, the IRS says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a lot of cash.
2. Mortgage interest
In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners, and it's a very popular deduction.
In addition, you can always deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose. This is called the "Home Equity Loan" exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called "debt-shifting." For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then ALL of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans - with only one hitch. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.
3. The sale
This is the best. In fact, I can hardly believe this myself. Here's how it works:
If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That's assuming you are married - singles get up to $250,000 tax free. And here comes the kicker: You can do this as often as every two years for the rest of your life.
This is as good an excuse for getting married as I have ever heard. Buy a fixer-upper in an up and coming neighborhood, work on it nights and weekends for two years, then sell it at a nice profit and pocket the cash, totally free of federal taxes. And most states recognize the federal exclusion, so you put the cash away totally tax free. You don't have to re-invest, you don't have to be age 55, and you can do this every two years forever. No, I'm not kidding.
The one restriction is that you MUST own and occupy the house as your principal residence, so don't try this on a rental property by pretending you live there when you don't. And there are some unclear rules about how you can take a partial exclusion if you live there less than two years, but we don't really know what they mean yet, so I recommend you stay there two years.
Many of these benefits came into being with the 1997 tax law, but lots of folks are just finding out about them now, so buy and sell to your heart's content. Just don't plan on staying forever!
1. The purchase
When buying your own home, most of the expenses are not tax deductible. But there is one exception that is worth finding.
The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for "daily interest" between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement.
Much more importantly, the IRS says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a lot of cash.
2. Mortgage interest
In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners, and it's a very popular deduction.
In addition, you can always deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose. This is called the "Home Equity Loan" exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called "debt-shifting." For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then ALL of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans - with only one hitch. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.
3. The sale
This is the best. In fact, I can hardly believe this myself. Here's how it works:
If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That's assuming you are married - singles get up to $250,000 tax free. And here comes the kicker: You can do this as often as every two years for the rest of your life.
This is as good an excuse for getting married as I have ever heard. Buy a fixer-upper in an up and coming neighborhood, work on it nights and weekends for two years, then sell it at a nice profit and pocket the cash, totally free of federal taxes. And most states recognize the federal exclusion, so you put the cash away totally tax free. You don't have to re-invest, you don't have to be age 55, and you can do this every two years forever. No, I'm not kidding.
The one restriction is that you MUST own and occupy the house as your principal residence, so don't try this on a rental property by pretending you live there when you don't. And there are some unclear rules about how you can take a partial exclusion if you live there less than two years, but we don't really know what they mean yet, so I recommend you stay there two years.
Many of these benefits came into being with the 1997 tax law, but lots of folks are just finding out about them now, so buy and sell to your heart's content. Just don't plan on staying forever!
Monday, December 2, 2013
Home Security Tips
You can make your home a whole lot more secure for little to no money. That’s because most of the best home protection simply involves smart thinking and good habits.
1. Pick your location carefully.
Location is a huge factor in home security, so buy in the best neighborhood you can afford. Real-estate agents can help point you in the right direction but they can’t — at the risk of committing housing discrimination — offer detailed guidance, so you must do your own research before you move:
· For the big picture, find statistics online (start with BestPlaces.net or Wikipedia). Make sure you’re looking at recent data.
· City police departments are the source for neighborhood-level crime statistics. The question is, will they share their data with you? Some cities — Portland, Ore., is one — post neighborhood crime stats online. Others will give the data if you phone the police department or the office of the mayor or city council members. You can also check with local newspapers.
· Finally, do your own sleuthing by spending time in the neighborhoods that interest you. Look for bars on doors and windows and alarm company signs in front of homes, giveaways to a troubled neighborhood. Chat with business owners. Knock on doors to ask neighbors about crime. If you’re renting, pick an upper-floor unit (ground-floor apartments can be attacked more easily). Look for on-site management and inspect the complex carefully, watching for damaged doors that signal previous break-ins. Best is an apartment with kick-proof metal door jambs rather than wood or a steel door.
2. Get smart.
“First of all, use the door locks that you already have,” advises Sgt. Dan Ryan, of the Palo Alto, Calif., Police Department. People in friendly communities that are generally safe may think they don’t need to lock their doors. That’s a big mistake, Ryan says. Here are more strategies:
Make it a nightly routine to check the locks. Involve children, too, says Chris McGoey, a security expert and consultant who calls himself “The Crime Doctor.”
Don’t open the door — and don’t let kids open the door — to uninvited strangers.
Use your automatic garage opener to close the garage door when you get home before exiting your car.
Stick around when people are working in your home. Notice what they’re doing. Check after they’ve left to ensure that nothing’s missing and that no one has left a window or door unlocked as a way to break in later.
Door mats, flowerpots and fake rocks are the first places burglars look for your spare key. Instead, give it to a trusted neighbor. Train children (especially teens) to keep key locations, alarm codes and other family security information private from their friends.
Check in with family as you come and go. When you get home, phone to say that you’re getting out of the car and are almost at the door; require kids to check in when they arrive home or leave.
Have a family discussion to plan what you’ll do in case of a break-in or home invasion. Whoever can escape should, McGoey says. Although the first instinct of many men may be to stay and defend their family, it’s better to get reinforcements than to get hurt.
Check out Schlage’s security checklists for movers, seniors, renters and homeowners.
3. Call the police.
Many departments have a home-security inspection program. A designated officer walks through your home looking for weaknesses and advises you on alarm systems, locks and lighting within a modest budget. For example, here’s the program for the city of Euless, Texas.
View more MSN videos
4. Join a Neighborhood Watch program. Or start one.
Ask your police department for details. These programs build cohesive neighborhoods, and that helps reduce crime and reinforce property values. (Read “How potlucks help home values.”) Make friends with the folks on every side of your place. Suggest keeping an eye on each other’s homes every day and trading favors — feeding the cat or watering plants — when you leave town.
5. Get a dog (or pretend to).
A dog won’t make your home impregnable, but it can make it look less approachable. You don’t want a pooch? That’s OK. Post a “beware of dog” sign anyway. McGoey, who doesn’t have a dog, has a sign and makes a point of asking service people to wait before entering his property so he can “put the dog in the house.” “The sign is cheap,” he says. “It makes people think twice.”
6. Upgrade your house number.
You want your home’s street number easily seen in the dark from across the street so police and firefighters can find you pronto in an emergency. Many fire departments or city or county governments sell inexpensive (around $5) reflective street numbers (see the Amherst, Mass., Police Department’s house number program). Whatever type you use, place it where it can be easily seen. Keep plants around the number well-trimmed.
7. Cultivate the lived-in look.
When you’re gone, don’t let stuff like newspapers, real-estate cards and pizza fliers accumulate in front of your door. “Make it look lived-in, even if you’re just gone for the weekend,” McGoey says. Before you leave, consider how your home will appear on the outside and avoid these classic mistakes that are like waving a red flag to invite burglars:
Leaving the porch light on 24 hours a day.
Leaving the trash out on Friday for pickup on Monday.
8. Other ways to fake it while you're gone.
Hold the mail delivery. Do this by visiting the post office to fill out a form or go online here, to the USPS.com Web site.
Set a few lights and appliances to switch on and off. Digital timers (around $9 to $15) let you set a schedule. You plug the timer into a wall receptacle and plug the radio, TV or lamp into the timer.
Leave a vehicle in your carport or in front of the house if possible. Ask a neighbor or friend to help you out by parking there.
Get friends to pick up newspapers, cut the grass, water plants, feed pets and open and close curtains, varying their routine to add a note of unpredictability if possible.
Most burglaries take place between 2 and 5 p.m. midweek, while residents are at work, McGoey says. These daylight jobs require a burglar to be quick, typically spending around 45 minutes selecting a home to target and just three minutes actually doing the job. For a small investment, you can further secure your home. The idea, Ryan says, is to make your place look difficult enough that a burglar moves on to an easier target:
9. Doors.
Thieves prefer the easy route, which is usually a door. Creeping out a window is hard, and it’s far more difficult when carting out a load of loot. Thieves typically test a house by first ringing the bell to ensure no one’s home, then trying the door handle and perhaps putting a shoulder to the door to see how solid and how firmly attached it is. To enter, the usual tool is a pry bar or a strong kick of the boot. Sadly, many doors fly open easily.
Upgrade the lock. For $25 to $150, you can buy a good Grade 1 (commercial grade) or Grade 2 deadbolt. No need for a locksmith; you can install it yourself;
Reinforce the strike plate. The strike plate is the metal plate in the door jamb into which the bolt slides. Strike plates, typically held in place by two half-inch wood screws, pull easily from the jamb, especially in older homes. Replace yours with a heavy-duty brass strike plate ($3 and up) that accepts up to six screws. Use 3-inch screws that screw into the door frame. “Now you can kick on the door and your foot will fall off before it gives in,” McGoey says. Reinforce all doors leading outside, including the door between the garage and house;
Get a better door. Replace your hollow-core door (easily kicked in) with a solid wood (around $300 on up) or metal-clad (starting at around $35) door. A new steel door (roughly $1,172) brought a return of $1,470, on average — a 129% return on the investment, according to Remodeling Magazine’s 2008-09 Cost vs. Value report.
10. Windows.
Keep your windows from opening more than 6 inches. Install replacement windows that include this as a built-in feature or cut a wooden dowel 6 inches shorter than the height of each window and drop the dowel into the metal gutter of each window frame so the window can’t be opened fully.
Burglars know that older sliding windows can be lifted right out of their frames. If yours is the type that pops out, install sheet-metal screws into the upper window track, screwing them in only halfway. The protruding screw fills the gap between window and frame, keeping the window in place. Window and glass laminate films (prices available through dealers) can toughen glass, making it more difficult to break. One advantage is that the product slows down intruders and forces them to create a racket trying to smash the glass.
11. Secure the perimeter.
Outdoor lights. Replacing porch lights and other outdoor lights with motion-sensor lights is cheap ($50 and up) and easy. “They don’t know for sure if you’re home or (if it’s) a sensor light,” McGoey says. “Burglars are all about taking the easiest path of resistance,” so most will flee. Program it to turn off in 30 seconds. Put sensor-triggered lights all around the perimeter of your home.
Erect a fence. Even a 3-foot fence helps create a psychological boundary that helps in deterring intruders, McGoey says. “It says, ‘This is my house, my property.’ People are going to be reluctant to step over that fence.” Higher fences may be appropriate in high-threat neighborhoods. Before building a fence, check with your city or county planning office. Most require a permit and many restrict the height and even building materials.
Eliminate hiding spots: Trim the trees and shrubs. A pruned and maintained landscape robs intruders of hiding places. It also signals to outsiders that your home is cared for and probably more secure. Put sensor-triggered lights all around the perimeter of your home.
12. Alarms.
What alarm is best? The one that makes the worst, most god-awful noise, Ryan says. (Renters can buy portable wireless alarm systems to take along when they move.)
What's your home worth?
Many people spend thousands of dollars buying, leasing and installing electronic alarms, and then they sign contracts requiring them to shell out thousands more to a company that monitors the alarm. Don’t, McGoey says. He says the most effective part of these systems is the warning sticker on your window or the sign in your yard. Otherwise, except for elderly residents and second homes with absent owners, there’s no need for expensive monitoring. A 30-second alarm blast should scare away intruders. Also, newer alarms can be programmed to do what monitoring companies do first anyway: phone you (or text you) when the alarm has been tripped.
1. Pick your location carefully.
Location is a huge factor in home security, so buy in the best neighborhood you can afford. Real-estate agents can help point you in the right direction but they can’t — at the risk of committing housing discrimination — offer detailed guidance, so you must do your own research before you move:
· For the big picture, find statistics online (start with BestPlaces.net or Wikipedia). Make sure you’re looking at recent data.
· City police departments are the source for neighborhood-level crime statistics. The question is, will they share their data with you? Some cities — Portland, Ore., is one — post neighborhood crime stats online. Others will give the data if you phone the police department or the office of the mayor or city council members. You can also check with local newspapers.
· Finally, do your own sleuthing by spending time in the neighborhoods that interest you. Look for bars on doors and windows and alarm company signs in front of homes, giveaways to a troubled neighborhood. Chat with business owners. Knock on doors to ask neighbors about crime. If you’re renting, pick an upper-floor unit (ground-floor apartments can be attacked more easily). Look for on-site management and inspect the complex carefully, watching for damaged doors that signal previous break-ins. Best is an apartment with kick-proof metal door jambs rather than wood or a steel door.
2. Get smart.
“First of all, use the door locks that you already have,” advises Sgt. Dan Ryan, of the Palo Alto, Calif., Police Department. People in friendly communities that are generally safe may think they don’t need to lock their doors. That’s a big mistake, Ryan says. Here are more strategies:
Make it a nightly routine to check the locks. Involve children, too, says Chris McGoey, a security expert and consultant who calls himself “The Crime Doctor.”
Don’t open the door — and don’t let kids open the door — to uninvited strangers.
Use your automatic garage opener to close the garage door when you get home before exiting your car.
Stick around when people are working in your home. Notice what they’re doing. Check after they’ve left to ensure that nothing’s missing and that no one has left a window or door unlocked as a way to break in later.
Door mats, flowerpots and fake rocks are the first places burglars look for your spare key. Instead, give it to a trusted neighbor. Train children (especially teens) to keep key locations, alarm codes and other family security information private from their friends.
Check in with family as you come and go. When you get home, phone to say that you’re getting out of the car and are almost at the door; require kids to check in when they arrive home or leave.
Have a family discussion to plan what you’ll do in case of a break-in or home invasion. Whoever can escape should, McGoey says. Although the first instinct of many men may be to stay and defend their family, it’s better to get reinforcements than to get hurt.
Check out Schlage’s security checklists for movers, seniors, renters and homeowners.
3. Call the police.
Many departments have a home-security inspection program. A designated officer walks through your home looking for weaknesses and advises you on alarm systems, locks and lighting within a modest budget. For example, here’s the program for the city of Euless, Texas.
View more MSN videos
4. Join a Neighborhood Watch program. Or start one.
Ask your police department for details. These programs build cohesive neighborhoods, and that helps reduce crime and reinforce property values. (Read “How potlucks help home values.”) Make friends with the folks on every side of your place. Suggest keeping an eye on each other’s homes every day and trading favors — feeding the cat or watering plants — when you leave town.
5. Get a dog (or pretend to).
A dog won’t make your home impregnable, but it can make it look less approachable. You don’t want a pooch? That’s OK. Post a “beware of dog” sign anyway. McGoey, who doesn’t have a dog, has a sign and makes a point of asking service people to wait before entering his property so he can “put the dog in the house.” “The sign is cheap,” he says. “It makes people think twice.”
6. Upgrade your house number.
You want your home’s street number easily seen in the dark from across the street so police and firefighters can find you pronto in an emergency. Many fire departments or city or county governments sell inexpensive (around $5) reflective street numbers (see the Amherst, Mass., Police Department’s house number program). Whatever type you use, place it where it can be easily seen. Keep plants around the number well-trimmed.
7. Cultivate the lived-in look.
When you’re gone, don’t let stuff like newspapers, real-estate cards and pizza fliers accumulate in front of your door. “Make it look lived-in, even if you’re just gone for the weekend,” McGoey says. Before you leave, consider how your home will appear on the outside and avoid these classic mistakes that are like waving a red flag to invite burglars:
Leaving the porch light on 24 hours a day.
Leaving the trash out on Friday for pickup on Monday.
8. Other ways to fake it while you're gone.
Hold the mail delivery. Do this by visiting the post office to fill out a form or go online here, to the USPS.com Web site.
Set a few lights and appliances to switch on and off. Digital timers (around $9 to $15) let you set a schedule. You plug the timer into a wall receptacle and plug the radio, TV or lamp into the timer.
Leave a vehicle in your carport or in front of the house if possible. Ask a neighbor or friend to help you out by parking there.
Get friends to pick up newspapers, cut the grass, water plants, feed pets and open and close curtains, varying their routine to add a note of unpredictability if possible.
Most burglaries take place between 2 and 5 p.m. midweek, while residents are at work, McGoey says. These daylight jobs require a burglar to be quick, typically spending around 45 minutes selecting a home to target and just three minutes actually doing the job. For a small investment, you can further secure your home. The idea, Ryan says, is to make your place look difficult enough that a burglar moves on to an easier target:
9. Doors.
Thieves prefer the easy route, which is usually a door. Creeping out a window is hard, and it’s far more difficult when carting out a load of loot. Thieves typically test a house by first ringing the bell to ensure no one’s home, then trying the door handle and perhaps putting a shoulder to the door to see how solid and how firmly attached it is. To enter, the usual tool is a pry bar or a strong kick of the boot. Sadly, many doors fly open easily.
Upgrade the lock. For $25 to $150, you can buy a good Grade 1 (commercial grade) or Grade 2 deadbolt. No need for a locksmith; you can install it yourself;
Reinforce the strike plate. The strike plate is the metal plate in the door jamb into which the bolt slides. Strike plates, typically held in place by two half-inch wood screws, pull easily from the jamb, especially in older homes. Replace yours with a heavy-duty brass strike plate ($3 and up) that accepts up to six screws. Use 3-inch screws that screw into the door frame. “Now you can kick on the door and your foot will fall off before it gives in,” McGoey says. Reinforce all doors leading outside, including the door between the garage and house;
Get a better door. Replace your hollow-core door (easily kicked in) with a solid wood (around $300 on up) or metal-clad (starting at around $35) door. A new steel door (roughly $1,172) brought a return of $1,470, on average — a 129% return on the investment, according to Remodeling Magazine’s 2008-09 Cost vs. Value report.
10. Windows.
Keep your windows from opening more than 6 inches. Install replacement windows that include this as a built-in feature or cut a wooden dowel 6 inches shorter than the height of each window and drop the dowel into the metal gutter of each window frame so the window can’t be opened fully.
Burglars know that older sliding windows can be lifted right out of their frames. If yours is the type that pops out, install sheet-metal screws into the upper window track, screwing them in only halfway. The protruding screw fills the gap between window and frame, keeping the window in place. Window and glass laminate films (prices available through dealers) can toughen glass, making it more difficult to break. One advantage is that the product slows down intruders and forces them to create a racket trying to smash the glass.
11. Secure the perimeter.
Outdoor lights. Replacing porch lights and other outdoor lights with motion-sensor lights is cheap ($50 and up) and easy. “They don’t know for sure if you’re home or (if it’s) a sensor light,” McGoey says. “Burglars are all about taking the easiest path of resistance,” so most will flee. Program it to turn off in 30 seconds. Put sensor-triggered lights all around the perimeter of your home.
Erect a fence. Even a 3-foot fence helps create a psychological boundary that helps in deterring intruders, McGoey says. “It says, ‘This is my house, my property.’ People are going to be reluctant to step over that fence.” Higher fences may be appropriate in high-threat neighborhoods. Before building a fence, check with your city or county planning office. Most require a permit and many restrict the height and even building materials.
Eliminate hiding spots: Trim the trees and shrubs. A pruned and maintained landscape robs intruders of hiding places. It also signals to outsiders that your home is cared for and probably more secure. Put sensor-triggered lights all around the perimeter of your home.
12. Alarms.
What alarm is best? The one that makes the worst, most god-awful noise, Ryan says. (Renters can buy portable wireless alarm systems to take along when they move.)
What's your home worth?
Many people spend thousands of dollars buying, leasing and installing electronic alarms, and then they sign contracts requiring them to shell out thousands more to a company that monitors the alarm. Don’t, McGoey says. He says the most effective part of these systems is the warning sticker on your window or the sign in your yard. Otherwise, except for elderly residents and second homes with absent owners, there’s no need for expensive monitoring. A 30-second alarm blast should scare away intruders. Also, newer alarms can be programmed to do what monitoring companies do first anyway: phone you (or text you) when the alarm has been tripped.
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