Has the Economy Caused Property Tax Revenue to Fall?

Most home owners, including activists that consistently promote increases in government spending, desire to have their home values consistent with the current housing market. (Ironic in a way.) Knowing you are paying more in taxes when rates are based on decreasing home values is something most individuals despise. While there has been a reduction in tax revenue due to reduced spending the local governments have yet to strongly lower owner's assessed values.



A new study from USA Today shows that property tax collection has increased even while the economy tanked. However, for the first time since 1995 collection rates for 2011 were below the rate of inflation. Many local governments are just now starting to review property values. Most local governments created laws preventing assessments of the same home over a short time period thereby preventing drastic increases in property taxes. Well, these rules also apply when property values decrease as they did the past several years.

Based on the USA Today report the property tax collections last year rose 1.2% but actually declined 0.9% when adjusted for inflation. Property taxes generated $436 billion which is about $66 billion more than in 2006 when home values peaked.

Realtors are a great source of information regarding true property value. The only way to have a home value reduced is through a Comparative Market Analysis (CMA). Many Realtors will help fight by providing actual CMA's when confronting the local government. Providing a Zillow Zestimate to a government official will only have them laughing. Hiring an appraiser is an option but even then they are not always the most reliable.

For more on the study head over to USA Today.

Jobless Claims Hits 4-Year Low, Fed's Business Index Highest Level Since June 2010

The unemployment rate held steady for February at 8.5% despite increased jobs numbers as reported last week.  This was caused by more individuals coming back into the labor market seeking jobs.  The U6 unemployment rate (which includes people who stopped searching for employment) actually dropped.

State Unemployment Claims

"This suggests that the recovery is firmly on track," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

The consumer price index increased 0.4% last month driven by increased fuel prices. Food prices actually dropped for the third straight month.

For more details on the data click here.

Guest Article from NewHomes.move.com - Retrofit Your Home

Homes In Sugar Land (Country Club Lifestyle Realty) has teamed up with www.NewHomes.move.com the official website for the National Association of Home Builders to bring even more exciting and relevant content to our Real Estate Blog! Not only do we feature National and Local News, Housing Statistics, Local Community Information, Charity Events and our very own housing studies, but we can now bring connections and advice from Home Builders! So, please welcome Andrew Hill as our very first guest blogger!

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With all the hype about going green, you may just think it’s an expensive that just saves a couple of trees. But what if going green didn’t have to cost a fortune? What if going green meant you could actually save money? At first, this may sound like an outlandish idea. After all, when I hear the words “green home” I often mistakenly picture a strangely shaped “house” made out of organic tea-leaves and recycled aluminum cans. But going green isn’t a strange space-age concept and better yet, retrofitting your home can create significant savings.



To retrofit your home, the first thing you should consider is having an energy audit. These experts will look at every aspect of your house and tell you where your energy savings can be improved. If you’re serious about going green, having an energy audit is a very important step. For those of you that aren’t quite ready to dive in, we have other suggestions for how you too can go green (and save some green while you’re at it.)

The two most sensible and easiest ways to retrofit a home are programming the thermostat and switching the light bulbs. Every family has a different threshold for temperature, so we won’t dictate the required settings. It’s up to you to decide what’s comfortable, but make sure to utilize other means of heating and cooling, such as putting on a sweater or using a fan. By programming your thermostat to be less stringent with the temperature while you are at work or asleep, you can significantly reduce your energy expenditures. Likewise, switching from incandescent to CFLs can potentially save you hundreds of dollars over the lifetime of the bulbs. CFLs not only reduce heat production and energy usage, but they also last much longer than incandescent bulbs.



Another simple way to retrofit your home is to plant trees. Trees? Yes. Planting trees that are native to your region can help save your air conditioning bill by providing shade and can even act as a wind blocker to protect your home on those drafty nights.

As you can see, going green doesn’t have to be a strange or even expensive. There are hundreds of other ways to go green, including switching to energy efficient appliances, using low-flow faucet heads, and caulking all of those leaky areas around your door. And if you’re thinking about buying, selling, or investing in real estate, green retrofits are a great way to boost the value of your home. So the next time you consider the cost of going green, think about what you could save by making the switch!

Andrew Hill

ahill@thebdx.com

Senate Legislation Requires Lenders to Speed Up Short Sale Process

Short Sales only impact the credit record for three years while foreclosures last seven years. Thus, many people under water on their mortgages have sought this route to sell their homes. However, lenders are extremely slow and have no strong desire to accept the loss. They hope that over time the home owner will obtain additional finances to continue payment.

Three senators are now banding together to require lenders to speed up the short sale process. The legislation, also known as the Prompt Notification of Short Sale Act, will require a written response from a lender no later than 75 days after receipt of the written request from the buyer. The bill will also allow the buyer to be awarded $1000, plus “reasonable” attorney fees if the Act is violated.

For more head over to DSNEWS

US Housing Starts Continues Increase - Hits 2008 Levels

The U.S. housing starts rose more than most economists expected in January. The rise was caused by a surge in new rental property boosting hopes the housing sector could help economic growth this year.

The Commerce Department reported on Thursday that housing starts climbed 1.5 percent to an annual rate of 699,000 units.

Starts of multi-unit buildings, which are often rented, jumped 8.5 percent last month. New construction on buildings with five units or more increased 14.4 percent.

Groundbreaking on single-family units, which make up a much larger portion of the sector, fell 1.0 percent. This might appear as bad news, but in actuality it is positive news because the current inventory of single family homes continues to steadily drop. In Houston for January the number of sales actually increased in 2011 compared to 2010, and the inventory significantly dropped. The average price of single family home increased just below 1%. All this data continues to show that the housing market is improving and investors and some home owners realize that prices and loan rates are at all time lows.

U.S. Housing Starts

While housing starts are still increadibly low when compared to 2006 (2.2 million) we must remember that during the housing boom builders were flooding the market. We do not want to witness those insane levels again until the population increases substantially.

Tax Review - Debt Relief Forgiveness Act of 2007

The IRS requires anyone that received forgiveness from a previous debt to report that amount as income. However, the Mortgage Relief Debt Forgiveness Act of 2007 allows individuals to exclude the amount forgiven on their principal place of residence. This particularly helps individuals that were under water on their mortgage and thus utilized a short sale to unload the property. Currently the exemption applies from 2007-2012.

Obama is now seeking to have this act extended through January 1st of 2015. DSNews

To learn about what qualifies read IRS publication 4681.

Here are some more examples of debt which is not taxable.

• Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
• Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
• Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
• Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
• Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.

For specifics you can also contact a certified professional accountant.

Unemployment rate drops to 8.3% on strong jobs numbers!

The US economy created 243,000 jobs in January dropping the unemployment rate to 8.3%. Even better were the revised November and December numbers that increased by 50,000 jobs. The biggest gains were in the professional and business service category. The markets have responded favorably as all currently experiencing over 1.0% gains.

For more details head over to CNNMoney.

Housing Market Showing Real Signs of Strengthening

The long-awaited housing recovery is beginning to blossom, according to industry experts taking a look at recent existing-home sales.

While admitting home sales “are still very low,” Paul Dales, chief economist at Capital Economics, says “it is clear that housing recovery is now well underway.” The evidence: home sales have been on the rise for the past three months, posting a 5 percent increase in December.

Housing inventory is on the decline and fell to its lowest level since March 2005 last month, according to NAR. Approximately 2.3 million homes are available for sale currently. “The inventory supply suggests many markets will continue to see prices stabilize or grow moderately in the near future,” Yun said.

For more head over to DSNEWS.com

How Accurate Is Zillow? New Study of Actual Home Sales Says Not Really.

Zillow, based in Seattle, Washington, has made millions of dollars since its launch many years ago. The idea of allowing anyone to see the value of their home for free was a novel idea with extraordinary appeal to home owners. Zillow seeks to utilize public records combined with math formulas to calculate a home value.

So, how accurate is this “Zestimate®” value? At Country Club Lifestyle Realty we have analyzed 91 homes sold throughout Houston to show that Zillow will at times be consistent with the actual sales price of a home, but the overall results are not a ringing endorsement. In a few cases Zillow missed the sales value of a home by 25-30%. In one specific case the value was off by $121,000. That is a large chunk of change.

The study involved home sales ranging in value from $130,000 to $530,000 over a 30 day period beginning in December 2011. The majority of sales in the Houston and surrounding suburbs fall within this range. Higher end homes were specifically excluded from the study since luxury homes may tend to skew the data. The intent of the study is to determine an accuracy level for the vast majority of home owners. While the study includes the Houston and surrounding suburbs the author believes the values are consistent for the majority of the country. The results are similar to a study performed by The Wall Street Journal in 2007.

The actual data utilized in the study is presented below. Figure 1 provides the raw data. Figure 2 shows a linear comparison of the same data with 5% error bands. Figure 3 shows the normal distribution using a bell curve.

Percent Error of Zillow's Zestimate Against Actual Home Sales

5% Error Bands for Zillow Zestimate When Compared Against Actual Home Sales

The Normal Distribution of Zillow's Zestimate in Percent Error Against Actual Home Sales

Using a statistical analysis the results are the following:

• Zillow’s Average Percent Error: 6.14%
• Study Accuracy: +/- 0.86%
• Median: 6.70%
• Standard Deviation: 8.45%

As evident by first glance (plus the large standard deviation) the only clear trend is that Zillow generally underestimates the value of the home. For this study homes below $160,000 tended to not exhibit large swings in percent error when compared to their actual sales price. Beyond this value a specific home may be undervalued by 25% or overvalued by 15%. Overall 77% of the homes were undervalued. This is good news for buyers when they convince sellers that Zillow is an accurate representation of their home’s value. In other scenarios they may lose out on the house of their dreams by insulting the home owner with a low ball offer.

For a given home owner there is only a 1 in 5 chance their Zestimate is within 2% of the actual value and a 1 in 3 chance the value is within 4%. The same 1 in 3 chance also exists for a Zestimate above 10%. Overall these results are not impressive.

As reported by The Wall Street Journal, through an interview with Stan Humphries, Vice President of Data and Analytics, Zillow's estimates utilize sales prices, past sales history, tax assessment data, and general home size. In addition they seek to obtain a value through similar comparable homes. Based on this information, why then is Zestimate wrong and why so much random variation when compared to actual sales?

The approach as stated by Mr. Humphries appears sound; however, after reviewing this statement the error becomes apparent. First, tax assessments can vary significantly from home to home. Some homes may be homestead while others may not have been re-assessed for several years. Second, past sales history (as most real estate agencies and banks will attest) provide no indication of current or future performance. The housing economy can change quickly as evidenced in 2008. Third, the general home size leaves out the amenities associated with homes and communities. For example, gated communities generally increase the home value. Upgraded kitchens and bathrooms on a 1970’s home can impact the overall value. The overall condition of the building and lawn clearly influences the sale value. Even the energy rating of a home can have a significant impact.

Clearly Zestimate is not a reliable number but sadly many home owners lean on Zillow to determine the value of their home. A quick run through blogs posted by home owners in Zillow’s Real Estate Advice section illustrates this fact. Many voice their frustration to Zillow when their Zestimate changes due to tweaks in the algorithm and the value declines.

So how should a home owner obtain a better representation of their home value? The most accurate method is to contact a local Realtor. However no longer are in home visits or long extended phone conversations required. Many Realtors (including CCLR) now offer a free market analysis through e-mail. Home owners can sign-up for monthly email campaigns that provide current home sales in their area. For anyone around Houston and the surrounding suburbs, CCLR utilizes a program called Market Snapshot that provides the latest home sales and listing details tailored for a specific home. Click here to enter your home's address and information for your free Market Snapshot.

National Average Home Loan Amount Also By State

Lending Tree has released data showing the average home mortgage amount broken down by state. The national average is $222,261 which amounts $1061/month on a 30-yr note at 4% without insurance and taxes. So where is Texas? They came in near the bottom at just under $183,000.

Surprisingly New York or California did not top the list. Actually they didn't even make the top 3. Based on loan amount the top five most expensive places to live is:

1. Alaska - $677,299
2. Washington D.C. - $393,453
3. New Jersey - $344,240
4. New York - $340,124
5. Maryland - $328,650

The five cheapest places are:

1. Mississippi - $137,182
2. Nebraska - $137,515
3. Delaware - $140,398
4. Indiana - $147,135
5. Iowa - $148,344