Update from CAR Business Meetings

FHA Reform Update: On Thursday (1/24) the House and Senate resolved their differences over FHA reform. Among the changes that will be forwarded to the President are an increase in the conforming loan limit to $729,750 (or 125 percent of the area median home sales price) and a decrease in down payment requirements. Congress also approved a one-year increase in the conforming loan limit for the Government Sponsored Enterprises (Fannie Mae and Freddie Mac) to $729,750.
Speaking at the C.A.R. meeting in Indian Wells on Friday (1/25), Charles McMillan, 2008 NAR president elect, reported on the impact of these changes. McMillan said the new loan limits will reduce foreclosures nationwide, provide more options for refinancing, reduce housing inventory, increase sales volume and increase liquidity in the mortgage markets.

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Government Affairs Issues at the C.A.R. Business Meeting: More than 1,000 REALTORS® from throughout California attended the winter C.A.R. business meeting in Indian Wells last week. Alex Creel, who leads C.A.R.'s legislative activities in Sacramento, reported on real estate issues they’re monitoring in the Capitol:

Mortgage Interest Deduction: The State of California is now faced with a $14 billion deficit and lawmakers are looking for new revenue sources. According to Creel the California Legislative analyst recently released a report that recommends elimination of the state income tax mortgage interest deduction on primary and, in some cases, secondary residences. Currently there is no proposed legislation to alter the deduction. However, given the massive state budget deficit and the legislative analyst's report, C.A.R. will aggressively oppose any scheme that tampers with the interest deduction.

Agents of Equity Purchases: Current state law requires agents representing clients in equity purchasing transactions to secure a (literally) non-existent surety bond. C.A.R. is supporting legislation to eliminate the surety bond requirement and allow an errors and omission insurance policy to be used in lieu of the bond.

Common Interest Development Owner Rights: C.A.R. is supporting legislation that, among other things, will prevent an HOA from prohibiting property owners from renting their units.
Statewide Propositions: The C.A.R. Board of Directors took positions on the following measures that will appear on the 2008 statewide ballots.

Jarvis Initiative - California Property Owners and Farmland Protection Act. C.A.R. will support this proposition that will limit local governments ability to take residential property through the use of eminent domain.

League of California Cities Initiative – Homeowners and Private Property Protection Act. C.A.R. opposes the League’s eminent domain initiative because it does not adequately protect property rights and limit eminent domain activities.
C.A.R. will not take positions on Prop 91 (Transportation Funding); Prop 92 (Community College Funding); Prop 93 (Term Limits); or on the Indian Gaming propositions 94, 95, 96 and 97 because they are not directly related to real estate.

Real Estate Reality - Opportunity Market

We find ourselves in a market where buyers and sellers have some hesitation and I can't understand why. This is an "Opportunity Market" for buyers and sellers who have been waiting on the sidelines for many months. There is safe, affordable financing available to qualified buyers. Interest rates for a 30 year fixed loan can be found in the range of 5 7/8% with no points. My gosh, what more can a buyer ask for.

Well with the anticipation of the Feds reducing rates by another 1/2 point at the end of the month it's a great time to buy! Once again rates are at an all time low and at par with the 2004/2005 market place.

There are motivated sellers who are looking to make changes, whether moving up or out of the area there are deals to be had. If you have been sitting on the sidelines, sit no longer and seize the opportunity!

Installation of New Officers

Bay East Association of REALTORS® installed it's new officers and directors for 2008. Heading the line up to become the 61st President of the California's Premier Association was Melrose Forde. She will be supported by Pat Huffman, her President Elect and Pam Winterbauer, her 2008 Treasurer.

These women will be leading the Association into 2008's Market of Opportunity for buyers and sellers with 80 years of experience between them.

Tax Law Changes for 2008

One of the questions that I am asked most frequently at the beginning of the year is "What tax changes have been made this year?" First, there really are not too many changes to report this year other than the usual increase in standard deduction rates and personal exemption amounts. There are however, a number of provisions in the tax code that would have expired had not congress voted to extend them.

They are:
The un-reimbursed classroom related expense deduction for teachers has been extended through 2007. This gives teachers a up to $250 "above the line" deduction for classroom expenses.

The deduction for higher education expenses for students was extended through 2007. The deduction is for tuition and fees only, and can be a maximum of $4,000. Parents of eligible students can get the deduction if the student is claimed as a dependent on the parents return.
Deduction for state and local general sales taxes for those of you that itemize deductions was extended. This primarily benefits taxpayers who made large purchases during the year such as vehicles, boats, homes, or home building materials. It also benefits those of you who live in a state that does not impose a state income tax.

The IRS will be focusing on charitable deductions. Taxpayers cannot deduct a monetary donation unless they have either (1) a bank record, such as a cancelled check or a bank statement or (2) a written receipt from the charity. For donations of $250 or more, the donor must receive a written acknowledgement from the charity.

Residential energy tax credits are available on your personal residence for energy saving items installed in 2007 such as windows, skylights, exterior doors, insulation, furnaces and central air conditioning units. Taxpayers wishing to claim this credit must have a manufacturer's certification.

A "savers credit" is now a permanent provision in the tax code. This credit applies to joint filer's with AGI of less than $52,000, and single filers with AGI of less than $26,000.

For Homeowners: Those of you that purchased a new home in 2007, can now take a deduction if you were required to purchase private mortgage insurance (commonly known as PMI). In an effort to help those adversely affected by the downturn in the real estate market, you will not have to report as income any debt forgiveness on qualified acquisition indebtedness up to $2,000,000 on your principal residence. This exclusion from income is effective for debts discharged on or after January 1, 2007 and before January 1, 2010.

And lastly, some of you may have read in the newspapers about fixes to the Alternative Minimum Tax (AMT). This patch is only good for 2007 and it saves many taxpayers that otherwise would have had to pay an Alternative Minimum Tax. President Bush is expected to sign this bill. The AMT is tremendously complex, and I won't go into details here, however, if you are affected by the AMT, it will show on page two of your 1040 form.

Now a couple of California issues.
The California Franchise Tax Board advises that they are increasing audit focus on the following:
Alimony payments for both payers and receivers.
Car and truck expenses for those of you that take this deduction.
Filers claiming Head of Household filing status

Always check with your tax advisor to confirm the recent changes.