The Jones Report - Real Estate News from Sally Forster Jones

Real estate prices in 20 major metropolitan areas - rose 0.3% overall, marking eight months of increases in a row. California led the way, with San Francisco and San Diego both showing significant gains and Los Angeles impressively outperforming all the other cities tracked by the index.

Interest rates, including those for jumbo mortgages, remain low and buyers seem to be rushing to capture low rates before home prices go higher. Meanwhile nearly 35,000 Californians whose homes were foreclosed on or sold at a loss can now get needed tax relief through a bill just approved by the state Legislature. The new law waives state taxes on mortgage debt forgiven by the lender in a foreclosure or short sale. Californians were able to claim the tax breaks on federal returns, because the bill passed in time for people to take advantage of it by the April 15 deadline.

Also with increased optimism about the stock market and housing prices there has been a positive shift in consumer psychology. That kind of change in mindset typically means that the market has turned the corner and buyers are once again confident and ready to make new investments.

Please don't hesitate to call or send me an email if you'd like further information regarding the market.

Sincerely,

California Legislature approves tax break for people in foreclosures, short sales

LA Times

The measure, which is expected to be signed by Gov. Arnold Schwarzenegger, would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale.

Thousands of Californians whose homes were foreclosed on or sold at a loss would get tax relief under a measure approved Thursday by the state Legislature.

The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.

Gov. Arnold Schwarzenegger said he would sign the measure, which would also provide about $60 million in tax credits to green-energy companies, when it reached his desk. Californians can already claim the tax breaks on federal returns. Lawmakers passed the measure in time for people to take advantage of it by the April 15 deadline for filing tax returns.

"The mortgage-debt tax relief provision in this bill will provide financial shelter for tens of thousands of Californians who have lost their hopes and dreams in the housing market crash, and it's about time we gave these folks a helping hand," said state Sen. Ron Calderon (D-Montebello).

The short-sale provision would mean about $34 million less in tax revenue for the state over three years, according to the Franchise Tax Board.

The "green" credits are a response to the federal American Recovery and Reinvestment Act, which provides grants to firms for power plants that produce renewable energy. The federal government does not tax the grant money. Under the bill approved Thursday, California would provide similar relief.

Other parts of the measure, SB 401 by Sen. Lois Wolk (D-Davis), were called tax increases by Republicans. Even though they supported the tax-relief element, several GOP members of the Senate and Assembly voted against the bill, which was opposed by the Howard Jarvis Taxpayers Assn.

The Republicans objected to a provision that would reduce deductions for charitable gifts, and to changes that would allow the state to tax more income earned by minor dependents.

The changes would also make it harder to qualify a home as a principal residence for purposes of escaping capital gains taxes when the property is sold, and some penalties and interest charges to corporations would be increased, according to Therese M. Twomey, a principal consultant for the Senate Republican Policy Office.

These changes would bring in more than $10 million in new revenue over five years, Twomey said.

"It's an issue of fairness," said Sen. George Runner (R-Lancaster). "You are giving money to one group of people and taking it away from another group of people."

With the plunge in the real estate market, many Californians have found themselves owing much more on their mortgages than their homes are worth. Some have been foreclosed upon or asked their lender to approve a short sale, in which a home is sold for less than the debt, some of which is waived.

The amount waived has been considered taxable income under California law. The measure passed Thursday would eliminate that tax when a bank agrees to accept less than what is owed on a home.

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Home prices in California show strong, unexpected gains in January

LA Times

L.A. leads the S & P/Case-Shiller index of 20 cities with a 1.8% increase from December. The index rises 0.3% overall, its eighth monthly increase in a row. Some see recovery; others, a mixed picture.

A national index of home prices rose unexpectedly in January, with California cities posting strong gains, but some experts warned that the nation's struggling housing market could be headed for another fall.

The closely watched Standard & Poor's/Case-Shiller index of 20 metropolitan areas rose 0.3% from December on a seasonally adjusted basis. That marked eight consecutive months of home values improving.

The index also was down just 0.7% from the same month last year, the nearest that the year-over-year reading has come to positive territory in three years.

But expectations about housing's direction remain mixed as a series of government initiatives intended to bolster sales and stabilize values begin to expire.

Concern over a potential wave of foreclosures also remains high despite new efforts by the Obama administration to keep struggling borrowers in their homes.

"Forces that will bring home prices back down are mounting," said Patrick Newport, an economist for IHS Global Insight. "Our view is that despite this report, prices have further to fall -- about another 5%."

The Case-Shiller index, which covers three months of data, was influenced by a sales surge in November, when buyers rushed to take advantage of a federal tax credit for first-time purchases before its initial expiration.

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Southern California median price and sales volume up

DQ News

Southern California home sales in February were above year-ago levels for the 20th month in a row as buyers continued to snap up bargain properties with government-backed mortgages and tax incentives. The median price paid for a home rose on a year-over-year basis for the third consecutive month, a real estate information service reported.

A total of 15,359 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was virtually unchanged from 15,361 in January, and up 0.8 percent from 15,231 in February 2009, according to MDA DataQuick of San Diego.

The February sales average is 17,983 going back to 1988, when DataQuick's statistics begin. The sales distribution remains tilted toward lower-cost distressed homes, although not as steeply as most of last year.

"It's possible the stars won't line up this way again for many years. With prices and mortgage interest rates this low, the cost of ownership is about as low as we've seen it in decades," said John Walsh, MDA DataQuick president.

The median price paid for a Southland home was $275,000 last month, up 1.3 percent from $271,500 in January, and up 10.0 percent from $250,000 for February 2009.

The median peaked at $505,000 in mid 2007 and appears, so far, to have bottomed out at $247,000 in April last year. The peak-to-trough drop in median was due to a decline in home values as well as a shift in sales toward lower-cost homes.

"The market is less lopsided, but before a real rebalancing occurs adjustable-rate and jumbo mortgages need to come back. Not to where they were in 2007, but back to where they were a few years before that," Walsh said.

While 44.8 percent of all Southland purchase mortgages since 2000 have been adjustable-rate (ARMs), it was 4.0 percent last month, down from 4.3 percent in January and up from 2.1 percent in February last year.

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