Values and Tax changes, must read

In light of the oversupply we continue to see in the market, we disagree with the widespread view that home prices have reached a bottom or will do so in the near future,” said Michael Feder, president and CEO of Radar Logic. Feder added that a negative response to economic news, within the U.S. or elsewhere, could also undermine housing demand and seriously hurt home prices. According to Radar Logic, the RPX Composite price, which tracks home prices in 25 major metropolitan areas, showed a 1.8 percent increase on a monthly basis, but decreased by 0.87 percent year-over-year in March. With distressed homes remaining a significant portion of home sales transactions, Radar Logic said the significant discounts for distressed properties in relation to non-distressed means a further fall in prices.

According to RealtyTrac, homes in foreclosure or bank-owned accounted for 26 percent of all residential sales during the first quarter of 2012. In addition, the average sales price of homes in foreclosure or bank-owned in the same quarter was $161,214, which is a 27 percent discount compared to the average sales price of homes not in foreclosure or bank-owned.

My contention for the last year has been that “Large inventories of REO and homes in the foreclosure process still have to make their way into the ‘visible’ inventory of homes listed for sale, and as they do they will weigh on home prices.” The banks have been holding the inventory so to create the illusion that supply is low!

As for the temporary forces giving the market an added boost, the report named institutional investors as one of the driving factors. As rental prices increase, large investors are buying up discounted properties to convert them into rental units. This trend is driving up prices for distressed properties in certain metros where investor demand is high. Once prices for discounted properties rise to the point that investors won’t yield the return they are seeking, demand will decline again. Another market influence Radar Logic highlighted is the mild winter weather that was seen in many parts of the U.S. This led to an earlier start for home shopping. As a result, Radar Logic said the price for March’s strength may be paid by a weaker buying season later.

Radar Logic expects national home prices to decline over the next 18 months, but said when it comes down to it, timing of the bottom is academic.

Bye Bye Mortgage Debt Relief Act of 2007 conducted a national survey and found 34 percent of respondents indicated that the act, which is set to expire December 31, 2012, contributed to their decision to walk away sooner rather than later from their property. Those surveyed were clients who were actively considering or navigating through the foreclosure process.

The Mortgage Debt Relief Act releases homeowners from the obligation of paying taxes on mortgage debt forgiven from a short sale, foreclosure, or modification. Taxpayers are eligible if the property is the primary residence.

“The survey results are not surprising; saw a number of homeowners reach out to us in early and mid-2011 due to the impending 2012 deadline,” said Jon Maddux, CEO of, in a release. “Many were prompted to begin the foreclosure process in 2011 in order to ensure their foreclosure is complete by the end of 2012.”

While the expiring act motivates homeowners to seek completion of the foreclosure process before the expiration date, for those who won’t qualify in time, Maddux said not extending the act will then cause short sales to stop immediately due to the fear of getting hit with a huge tax bill.

In addition, 78 percent of respondents from the survey expressed intentions of walking away from their home. Of those, at least 74 percent would qualify for relief under the act.

“Potentially millions of people will find themselves stuck with a huge tax bill after foreclosure if the government doesn’t renew the Debt Relief Act at the end of 2012 or if they don’t finalize their foreclosure by that date. The bill may just expire, like when Congress chose not to renew the home buyer’s tax credit,” said Maddux.

Cheryl Gerhardt, a CPA who has worked with clients, said about 80 percent of the people who approach her about foreclosure tax consequences qualify for the relief under the act. “These are usually people who purchased during the height of the market from 2005 to 2007 and never had the opportunity to take out a second, whereas a few years ago clients who were getting foreclosed upon had made purchases in the early 2000’s, took out a home equity line of credit and could not qualify,” said Gerhardt.

In March, House Bill H.R. 4290, or Homeowner Tax Fairness Act, was introduced to extend the act to 2015. The bill is sponsored by Rep. James McDermott.

The Mortgage Relief Act was actually extended in October 2009, three months before the act’s expiration date.

See Video link with budget balancing genuis Bill Clinton regarding the Europe debt crisis

Bottom line, if you’re considering a short sale and want to know if you qualify, contact a professional and do it soon.

360 Group Partners can help evaluate your situation. Founded in 2006 as the “first consumer advocate group” that would help people for FREE, we’ve been over 95% successful negotiating mortgage challenges since our beginning. Call us today! 623-748-7448.