Building a recovery
Recent passage of legislation to avoid what has become commonly known as the “fiscal cliff” has real estate experts breathing a sigh of relief.
And now, whether it’s new construction, existing home sales or rental properties, those experts are predicting that low mortgage rates and lender willingness to loan money will spur continued growth well into the new year.
”The housing market is great here,” said new Warren Area Board of Realtors president Marlin Palich. Palich took over the post in recent weeks, just in time for what he predicts will be a great 2013. ”We are seeing homes that have been on the market for a long time, and all of the sudden we are getting multiple offers. That proves there was a pent-up demand. It could be (Utica) Shale or a little more positive outlook out there.”
Adding to the positive outlook is real estate language included in legislation passed last week by Congress to avert what some have said could have created a “chilling effect” on the recovering housing market.
With the bill’s passage came the extension of a tax break to forgive mortgage debt. It had been set to expire Dec. 31. The Mortgage Forgiveness Debt Relief Act, first passed in 2007, forgives homeowners’ income taxes on portions of their mortgage in short sales, foreclosures and principal reductions.
In essence, if a lender forgives some or all of an individual’s debt, the IRS considers that forgiven amount as income, and the borrower is taxed on the forgiven amount.
Allowing the relief act to expire could have had “chilling effects on homeowners considering a short sale,” said Elise Brooks Perkins, communications director for the Financial Services Roundtable, in information released by the National Association of Realtors. Perkins said more sellers would have backed out of completing a short sale without the forgiveness, ultimately prolonging the housing recovery.
”There were some great things in the bill to protect the homeowners,” Palich said. Those items also included language to keep estate taxes in check, also a plus for the real estate market.
Under the bill, the first $5 million in individual estates and $10 million for family estates are now exempted from the estate tax.
Other language in the bill extended through 2013 the deduction for mortgage insurance premiums for people who earn less than $110,000. It also gives a 10 percent tax credit up to $500 for homeowners who make energy improvements to existing homes through 2013.
”The only thing that concerns me is that the payroll tax is going to go up, so that will pull money out of your paycheck,” Palich said. ”That might take some liquid income out of the economy.”
Still, overall Palich said he believes the bill’s passage will mean good news for the housing market.
Anthony Lolli, CEO of Rapid Realty, billed as one of the fastest growing realty companies in New York City, agreed Friday that the legislation’s passage will do more good than harm for the real estate industry as a whole.
”I don’t think it’s going to have a negative impact because the ability to borrow money is still cheaper,” Lolli said. ”Everybody was waiting to see what the presidency was going to be like, and now they are waiting to see what the new tax laws are going to be. All in all, people are loosening up and starting to invest.”
Statistics show November was the 19th consecutive month in which Ohio home sales increased compared to the previous year.
Robert U. Miller, outgoing president for the Ohio Association of Realtors, described the housing market as undergoing a “remarkable turnaround from the challenges presented by the economic downturn of a few years ago.”
“The fact that the number of homes put under contract in November increased for the 19th straight month is a clear indication that we’re making progress in establishing a solid foundation for a stable, sustainable and growing housing market throughout the Buckeye State,” Miller said.
Palich and Lolli individually pointed to low mortgage rates, which Palich noted have been hovering around 4 percent. He described them as among the lowest he has seen.
”I can tell you in the 1980s I remember selling a house at 21 percent interest, and now we are looking at rates in the 4s,” Palich said.
In addition to these factors, add in the growing demand for land and residential property stemming from the burgeoning natural gas drilling industry.
”I am so excited about that. It’s great for our valley,” Palich said. His company, Northwood Realty Services, also operates an office in Columbiana County where the natural gas industry has already taken off, and he anticipates similar growth in Trumbull County.
”I see a bigger impact down there,” he said. ”Here, people just basically received their signing bonuses, and the first will is being drilled. But I think we are going to see even more activity.
”That’s going to make the (real estate) market even busier,” Palich said.