How tax bill may affect the housing market

tower
Turret

It is really too soon to tell how the tax bill will affect the housing market. On the one hand, it shouldn’t have much of an impact on housing that is costs less than 650K because the mortgage interest on a mortgage up tp 500K will still be tax deductible, for those who itemize.

If the tax bill passes as is  95% of taxpayers will claim the standard deduction rather than itemize, according to experts because the standard deduction will almost double.

That means that mortgage interest will not be deducted for most. Currently according to the IRS about 31% of taxpayers itemize, and can deduct mortgage interest.

If higher priced homes decrease in value that doesn’t mean that lower-priced homes will follow. The demand for homes at the lower end of the price spectrum is very high and I can’t see that changing.

There is some speculation that if interest on loans used to pay for second homes is not longer tax deductible that prices of the summer cabins in Northern Minnesota will go down. I will believe it when I see it.

The five of eight rule may have an impact.  Under current law, you can exclude up to $250,000 ($500,000 for married taxpayers) in capital gains from the sale of your home so long as you have owned and resided in the house for at least two of the last five years.

That rule is going to change to five of the last eight years. The rule will make homeownership more of a long term proposition and home sellers may want to consult a tax advisor if they wish to sell before they have owned the home for eight years.

People used to move about every 7 years but in the last decade, that has changed to about every 10 years so it is hard to say what kind of an impact the new five of eight rule will have on the real estate market.

I remember the big tax cuts during when Reagan was president. At the time we were in a recession. I don’t really understand why a tax cut and jobs bill is being passed during a time of high employment. In fact, we may not have enough workers to fill more jobs.

It isn’t clear to me right now as a business owner if my taxes will go up or down. The tax cuts are aimed at large corporations not at small businesses like mine that make up 99.7% of all U.S. businesses.

The Republican party used to be against running huge deficits but now they are in favor. Here is a link to a list of how they voted.

The bill will not be made into law until it is reconciled with the House bill and signed by the president who will sign anything he is asked to sign . . . or at least he has so far.

There are still numerous advantages to home ownership as opposed to renting. Interest rates are likely to continue to rise so buying a house now might make more sense than buying it later.

Real estate has been a tax favored investment for decades yet homeownership is currently at a 50 year low last July and has started to go up again. Will new tax laws cause home ownership to fall again?

Sometimes housing seems unfair

fair housing logo
Fair housing

When we talk about fair housing it is usually about rental properties. There are national laws, State laws, and local laws against discrimination  based on the following:

  • Race
  • Sex
  • Color
  • Religion
  • Familial Status (having kids or being pregnant)
  • Public Assistance (MFIP, EA, GA, SSI, etc.) (Minnesota)
  • Sexual Orientation (Minnesota)
  • Marital Status (being married, single or divorced) (Minnesota)
  • Disability
  • National Origin
  • Creed (belief or faith) (Minnesota)
  • Age (St. Paul only)

It is possible to discriminate against home buyers. As a real estate agent, I can not participate. There are homeowners who do discriminate. There are multiple offer situations where the buyer wrote the love letter to the sellers and the sellers really liked the idea of a family with children living in the house.

The neighbors in a condo association will tell me that they want me to make sure that whoever buys the condo is a good neighbor.

I have also seen a couple of examples of “pre-listed” or “coming soon” homes where the home was “pre-marketed” but only to a certain group of people. The end result was a buyer who was a perfect fit for the neighborhood at least in the eyes of the homeowner and the neighbors. There isn’t any way of knowing who else might have wanted to buy the place.

I would be violating fair housing laws by recommending a neighborhood. I know that seems far fetched but the government doesn’t want people like me steering home buyers to one neighborhood or another. I can answer questions about neighborhoods.

Housing discrimination does not have to be intentional to be illegal and is more common than most people believe.

St. Paul is segregated. I think the reasons are more complicated than illegal discrimination. Why is it that St. Paul is all one school district but we have good schools and some not so good schools?

A day for giving back to the community

Today is “give to the MAX” day.  A Minnesota thing and an opportunity to give to your favorite charity. Find matching gifts and your favorite charity on the Give to the MAX web site. https://givemn.org 

They make it super easy to give. My favorite charities are in my own community. It doesn’t matter if you can only give a few dollars, every little bit helps and it can help even more today because there are matching gifts available.

cosmos flowers
Cosmos from my garden

Real estate regulations are local

Real estate really is local. Real estate is heavily regulated at the state level and the rules and laws are different in each state.

I was reading some real estate advice on one of those big national real estate web sites.   I thought that some of the advice was good but some of it did not apply or wasn’t appropriate for Minnesota.

Business practices seem to vary from one part of the state to another. They do things differently in Saint Cloud and in Mankato than we do them in St. Paul. If you would like to buy or sell a home find a St. Paul agent.

Minnesota real estate is regulated by the Minnesota Department of Commerce.  The Minnesota attorney generals web site had excellent consumer information for persons who want to buy, sell or rent property in Minnesota.

These guides are far better than the generic information I have seen on the big real estate web sites that sell homes and advertise refrigerators all on the same page.

Even the terminology used during a real estate transaction is different in say California than it is in Minnesota.

The Attorney General’s office  doesn’t sell anything not even refrigerators.

Check on these guides for Minnesota real estate information:

Home Buyers Handbook

Home Sellers Handbook

Landlord and Tenant Rights

Fall color
Local fall color – Harriet Island

They stole my data now they want my money

Hacker
Hacker

I have been notified three times this year that systems containing my private data have been hacked, compromised or breached.

One breach was in a company that has my social security number even though I haven’t done any work for them for eight years.

When I asked them to take my information out of their database they told me that they can not and that they keep personal data because sometimes people work for them again.

My advice is to choose your employers wisely because they may keep your personal data in their systems forever.

The social security number was invented in 1939. A lot has changed since then. The social security number is supposed to be used for just one thing, to track social security, yet I can not renew my drivers license or my real estate license or even get medical care without using my social security number.

How can data be considered private if 30 to 50 entities can demand it before they provide services.

There are companies that are making money by offering to protect our data. Some of the money being paid for identity protection services is going right back to the credit bureau that got hacked a few times. What a scam.

Identity protection services could be a scam. We don’t have any proof that they work or that they monitor anything.

I am getting a lot of emails from companies trying to scare me into buying identity protection and monitoring services. The free monitoring I am getting because of data breaches will eventually expire and I’ll have to pay for it. What a scam!

Identity theft can ruin a credit rating. Crooks use identify information to open new credit card accounts and then they go shopping.

People with low credit ratings have trouble renting apartments and qualifying for a home loan. The Fair Credit Reporting Act (FCRA) permits employers to request credit reports on job applicants and existing employees. That doesn’t sound at all fair to me.

The best interest rates go to the people with the best credit scores. There will be people who have trouble buying a home or who have to wait to buy a home because of identify theft.

The Fair Credit Reporting Act was passed in 1970 to ensure fairness, accuracy and privacy of the personal information contained in the files of the credit reporting agencies.

The system would be more fair if the credit bureaus had to pay me for the use of my private information, credit score and social security number.

We can put a lock or a freeze on our accounts but neither of those actions will prevent identity theft but will protect credit. A lock is more convenient but more expensive than the freeze. The credit bureaus as likely to have the most profitable year ever.

Honestly to me this is all outrageous.  If ever there was an industry that needs an overhaul the credit and credit score industry is it.

End of rant.

People don’t move as often as they used to

Moving isn’t as popular as it once was. I know that older people are less likely to move than younger people are and our population is aging. Younger people are not moving as often either mostly because not as many are moving because of jobs.

I’ll admit I haven’t moved in almost 30 years. I haven’t had a reason to move. Some of my friends have moved in the last few years. We usually move because of some life event like getting married, or divorced or having children, becoming empty nesters, retiring, the death of a spouse or old age.

According to the U.S. census bureau  moving is at a historic low.

Moving in America[Source: U.S. Census Bureau]