Housing and the Tax Code

Did you know that if you bought a home two year ago, and you sell it today, you can walk away with the profits without paying any tax on the gain? Well the limits are $500k of gain for a married couple and $250K for a single person. That's another reason why there is such an overinvestment in the housing market. Like the article points out, make $500k on a home after two years, you owe the government nothing; do the same thing in the same time period with stock like Google, and you owe $75K (15% cap. gain) to Uncle Sam. Easy math for anyone.
Lets face facts, property owners get all the tax breaks. From mortgage-interest deduction and capital gains exemption, to depreciation if there are rental properties involved. The current tax code is heavily favored for the multi-property owners . Ever notice how many real estate billionaires are out there? The fact is that code is also the reason why some many people rush to buy property even though it may break them financially.
But Congress may change that pretty soon, the tax code is only 8 years old and since then housing has boomed, coincidence? I think not. They may soon level the field and treat gains in real estate the same as any stock. This may do two things, normalize the real estate market, and help the goverment deep in fiscal deficits. To paraphrase Ronald Regan, a dollar earned is should a dollar taxed.

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Cayley Way Affordable Homes

New affordable home in Tustin, right on the border with Irvine and its within Irvine School District. These homes are available in Tustin Field and have special income eligibility requierments. They're all two story detached townhomes with upto 4 bedroom and 3 1/2 baths. Their site has a lot more information and a survey tool help to see if you qualify. Its a great opportunity for some to get into this neighborhood.

Visit Tustin Field for more information.

Location, location,...vocation?

The trouble with this real estate market is not that there aren't enough homes, but just not enough in areas that are desirable. So following the old rule of "Location, location, location" people start extending their budget an start using creative financing method to get into that dream home. Here are some thing may want to consider before taking the plunge.

1. Your first home shouldn't be your dream home.
2. Adding a room/bathroom isn't that expensive to a smaller house, as compared to buying one with it.
3. If you get ARM loan, don't fall for the trap that the loan agent tell you "You're going to be making more in 5 years, so int. only is a good idea today." According to whom? Remember its a loan agent not a fortune teller.
4. With these gas prices try to stay close to your job, you'll be amazed how much happier you'll be with a shorter commuter.
5. This may not always be possible, on a map use your job address as a center point, draw a circle from that point using your willingness to commute as a radius. See what neighborhoods you like and start your search there.

Your jobs is a big factor on where you live and what you can afford. That is a tacit statement but most peole tend to forget that when buying homes. So before you consider your home, consider how you feel about your job first.

Bubble Trouble

I read everyday about people leaving their jobs and risking it all in the real estate market. These people are partially motivated by tall tales of friends and neighbors striking it rich, and quite franky, their own delusions of grandeur. "If they can do it, so can I" right?
There's a lot to be said about skill and luck. Most people who've made it in real estate market have one and not the other. People seem to think that the CA real estate markets is another gold rush, find a claim and jump on it; not so. Many key factors makeup why certain regions prosper: job availability, median income levels, and of course affordability. This is a wonderful article points out the bubble neighborhoods in the US, notice that LA is on the list and SF, but not the OC.
Most people ask then what is the right time to buy a house? The simple answer is when the time is right for you, not the market, not your friends and neighbors, just you. And where ever you buy, plan on staying a long, long time.

Risky Markets

Median Highs

Well it finally happened; Orange County median home prices broke the $600K mark. It may seem like this real estate market is an unstoppable juggernaut, but there are signs of a slow down. Even though prices haven't come down per se, but they have increased at a very slow pace.
What does this all mean? Well if the pace is slowing and the prices aren't rising, its a good indication of stability, or a maybe drop on the horizon?

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Mortgage Smorgasbord

In the past when you looked at the mortgages available to an individual of median income, his/her options were quite limited. But not these days, everybody who's a lender or a broker has a mortgage plan that can get you into your dream home with "no money down!" and easy "flex payment schedules". Really terrific, right? I'm not so sure.
The article link below details some of the issues with the newest and latest way to get into your dream home, OPTION ARMS. What most people don't tell you is that the teaser rates that is given to you at 1.5% intro is a negative amortization rate, meaning you pay even less than the interest only payment amount montly, whatever portion not paid monthly is added back to your mortgage principle amount.
And another kicker, every year your base mortgage payment is adjusted by some percentage, usually 7.5% . So here's what that means, if you pay $1000 for the first 12 months of this "option arm", the following year your minimum payment is $1075, the following year the payment would be $1156....and so on and so on year after year. So in the 5th year your minimum payment has gone up to $1436...and then the teaser rate is GONE, and you have paid a cent of principle and you owe more than your original prinicple amount!
This is a great loan for people who are looking to make a quick buck (if that is even possible) by buying and selling every few years, but for someone who wants to live and stay in a place for a long time...I don't think so. Mortgage lenders have really become "creative" in this time of high home prices, just to get the buyer in. But an old real estate rule must always be adheared, what goes up...you know the rest.

Mortgage Article

Welcome to Irvinites

For all of you who don't know where Irvine is or what's it like please watch the follwing video. It tells a lot about the city, the Irvine Company, and its master plan. Its a decent video, and a good place to start the journey of this blog. Just in case you were wondering the theme music in the video is from the movie "Far and Away".

Irvine Video