Tax Times Favors Homeowners

Congress has consistently enacted tax legislation which favors homeowners. Indeed, much has been written that our tax laws discriminate against renters, by giving unfair and unequal tax benefits to those who own homes. For those of us who own homes, here is a list of the itemized tax deductions available to the average homeowner. Every year, you are permitted to deduct the following expenses:

• Real estate property taxes, both state and local, can be deducted. However, it should be noted that real estate taxes are only deductible in the year they are actually paid to the government.
• Interest on home loans on a first or second home is fully deductible, subject to the following limitations: acquisition loans up to $1 million, and home equity loans up to $100,000. If you are married, but file separately, these limits are split in half.
• Points paid to lower your interest rate are deductible. Points paid to a lender when you refinance your current home loan are not fully deductible in the year they are paid; you have to allocate the amount over the life of the loan. 

Source: Realty Times

Be sure to consult your tax advisor regarding taking advantage of all of your house-related deductions.  If you are looking for advice regarding your tax situation and do not have an advisor to talk to, we can recommend one.

Oil Driving the Markets

You use gas produced from oil to drive to the market. Well, apparently the price of oil has been driving the markets all year. While everyone has been watching the Federal Reserve Board for clues as to which way rates are going, we think that the Fed is watching oil prices. While the price of oil does not usually drive the markets, you can see that the stock market and interest rates dropped significantly while oil prices were bottoming earlier this year. Conversely, as the stock market has rebounded in the past few weeks, so have oil prices.

As you can guess, longer-term interest rates also have started trending upwards as stocks and oil prices have been rising. This is not to say that these trends will continue, but at least for now, the markets seem to be moving in tandem. As we have pointed out previously, lower oil prices are good for the economy, but the markets get spooked when they move too low. The last time this happened was the depth of the financial crisis and that is when the stock market also hit its low point of the decade.

When oil prices become too low along with other commodities, this is when the Fed starts thinking about deflation risks instead of inflationary risks. We think these risks will probably cause the Fed to hold off from raising rates this month, even though our economy is still growing and producing jobs. However, if the price of oil holds at this level or rises further, the Fed will have more flexibility at the next meeting. We should note that the last report on oil inventories showed that the surplus is continuing and thus there is little chance that oil prices will start spiking any time soon. So, enjoy your ride to the market.

The Markets

• Rates on home loans inched higher again in the past week. 
• Freddie Mac announced that, for the week ending March 10, 30-year fixed rates rose slightly to 3.68% from 3.64% the week before. 
• The average for 15-year loans was also slightly higher at 2.96%. T
• he average for five-year adjustables increased to 2.92%. 
• A year ago, 30-year fixed rates were at 3.86%, above today's levels. 
• Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield ended the survey week exactly where it started, however the solid February employment report boosted the yield noticeably on Friday and Monday. Our mortgage rate survey captured the impact of this temporary increase in yield, and the 30-year fixed rate rose 4 basis points to 3.68 percent. This marks the second increase this year. Nonetheless, the 30-year fixed rate remains 33 basis points lower than its end-of-2015 level." 

Rates indicated do not include fees and points and are provided for evidence of trends only.  They should not be used for comparison purposes.

Breaking News 

The supply of residential properties available for purchase dropped 8.6 percent over the past year, according to new data released by Zillow—and the three-month low in January’s housing starts may not bode well for this year’s inventory. The inventory shortage is more pronounced in some areas: "If you're looking for a home or trying to sell, it's important to know what kind of market you're in," said Zillow Chief Economist Svenja Gudell. "Hopeful buyers in a strong sellers' market should be prepared to move quickly, since homes don't stay on the market as long. In a buyers' market, they can afford to take their time and be more selective. However, low inventory is a factor affecting the majority of the country, so buyers should be prepared for a limited selection as we enter the homebuying season." But for those already in homes, there was good news: The latest Zillow Home Value Index reported values rose year-over-year last month by 4.2 percent, marking the tenth straight month of home value appreciation. The Zillow index now stands at $184,000. Source: National Mortgage Professional

Residential delinquencies and foreclosures continued to drop in the fourth quarter, with foreclosure starts falling to their lowest level since 2003, the Mortgage Bankers Association reported. The MBA Fourth Quarter National Delinquency Survey reported the delinquency rate for home loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.77 percent of all loans outstanding, its lowest level since third quarter 2006. The delinquency rate decreased by 22 basis points from the previous quarter and by 91 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. MBA Vice President of Industry Analysis Marina Walsh said the overall delinquency rate came in lower than the survey's historical average of 5.2 percent between 1979 and 2015. MBA said the percentage of loans on which foreclosure actions started during the fourth quarter fell to 0.36 percent, down by two basis points from the third quarter and down by 10 basis points from one year ago. This foreclosure starts rate was at the lowest level since second quarter 2003 and nearly 25 percent off its record high level during third quarter 2009. The report said the percentage of loans in the foreclosure process at the end of the third quarter fell to 1.77 percent, down 11 basis points from the third quarter and by 50 basis points from one year ago. This was the lowest foreclosure inventory rate seen since third quarter 2007. The serious delinquency rate, the percentage of loans 90 days or more past due or in the process of foreclosure, fell to 3.44 percent, a decrease of 13 basis points from the third quarter and down by 108 basis points from past year. This was the lowest serious delinquency rate since third quarter 2007. Source: Mortgage Bankers Association

Rising rents are quickly encroaching upon ‘a life event’ as the top reason homebuyers will look to purchase a home. As it stands, one in four homebuyers is looking to purchase because their rent is too high, according to a Redfin survey of 750 homebuyers this month. Redfin noted that this is up from one in five in November, and up from one in eight last August. When asked what most influenced their decision to buy, Redfin said that the only choice buyers cited more frequently was a major life event, such as the birth of a child or a marriage.  Meanwhile, Zillow, recently released a report saying that rent appreciation is finally projected to cool down in 2016, giving renters a much-needed break from what seemed to be never-ending price increases. "The slowdown in rental appreciation will provide some relief for renters who've been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up,” said Zillow Chief Economist Svenja Gudell. Source: HousingWire