Friday, January 04, 2013

Advice for the New Year:
Well, two pieces of good news were received this week out of Washington, DC. First, as I'm sure you all know by now, the Fiscal Cliff legislation passed. That by itself is very good news for homeowners. First, it helped avoid a possible drop back into recession, and second, it maintained the capital gains tax on sale of one's personal residence at the existing 15%. Cap gains on all other investments rose to 20%. Now, 5% may not seem like a significant amount, but apply it to your home's value if it's increased since you purchased it. For every $100,000 in increased value, that extra 5% would mean an additional $5,000 you'd have had to pay if the Cliff legislation hadn't kept the tax at 15%. Now, I don't care if you're making $50,000 a year or $1 million a year--five grand is STILL five grand (and that's for EVERY $100,000 IN INCREASED VALUE)! Better in your pocket than Uncle Sam's. So, for example, if you bought your home in 2005 for $400,000, and sold it this year for $750,000, yielding a profit of $350,000, the capital gains tax at 15% would be $52,500. Now, you could exempt from taxation the first $250,000 of that gain if you're single and $500,000 if married. But even if you were a single homeowner and deducted the $250,000 figure, that would still leave you paying 15% on the remaining $100,000 increased value, or $15,000. Had the cap gains tax on homes gone up, the number would have been $20,000 you had to pay in our sample.

The other good news is that today the latest monthly unemployment and jobs figures came out. They showed an increase in new jobs of just over 150,000 and the unemployment rate remained at 7.8%--not robust, but still positive in the face of Hurricane Sandy's depredations to the east coast. So what does the employment info mean for the housing market? Well, it's pretty basic. If you don't have a job, you probably aren't going to be buying a house. So this set of stats bodes well for those trying to sell their home. It means that there are likely top be more buyers out there able to buy your house. For buyers, it provides a further push to get your financing lined up and move on a purchase, because, even though rates are still near historic lows, they won';t stay there forever, especially if the economy strengthens rapidly.
Questions?: Call Peter: (415) 279-6466 or Jane: (415) 531-4091.


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