We knew it couldn't last forever: Mortgage interest rates are rising.

Last week, the average rate for a 30-year fixed mortgage rose by a full third to 4.46%. And while the new rate still pales in comparison to historical highs set back in the 1980’s, some experts believe this uptick along with recent comments from the Fed Chairman that the government may scale back on stimulus measures signify the beginning of a new upward trajectory for rates.

If you’re considering buying or selling a home, this increase and the trend it potentially signifies should motivate you to act sooner rather than later.

For buyers, the increase means a higher cost of home ownership with a higher monthly mortgage payment than if they’d bought last month.

For sellers, the increase may affect the ultimate value they are able to realize for their property since there may be fewer buyers willing to get into the market and commit to a purchase.

Ready to enter the market?

Whether you are a home buyer or seller, your local real estate agent is the first and best expert resource for everything from neighborhoods to lenders, home staging to escrow services.

A good agent will help their home-buying client clarify wants vs. needs in the home finding process; they will do the time-consuming legwork to find suitable neighborhoods and properties to show their client; they may provide access to flexible lending resources to assist their buyer; they will proactively serve their client’s interests by negotiating the best offer and terms possible; and they will coordinate all inspections and ensure the smooth processing of paperwork from the transaction, through escrow and closing.

A good agent will analyze the market value of their seller client’s property and help set a realistic asking price; they will assist with home staging work to ensure the property is presented in its best possible condition; they will market the listing through all appropriate real estate channels to maximize exposure; they will proactively serve their client’s interests by negotiating the best offer and terms possible; and they will ensure any contingencies are addressed swiftly and efficiently through the escrow and closing process.

Though I serve all of north and south Orange County, I’m a trusted area expert for north Orange County, especially Yorba Linda. Whatever side of the negotiating table they’re on, I consider myself the champion for my client, using the full extent of my years of professional experience to ensure the best possible outcome for their real estate goals. Call me today if you’re ready to take advantage of this dynamic real estate market!

Nanette Shapiro

(714) 924-0781

nanette.shapiro4@gmail.com

www.homesbynanette.com

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Don't Wait Too Long To Buy!

Mortgage interest rates are still at historical lows. That said, according to Zillow.com, California mortgage rates (as of May 15) have increased 19 basis points just since last week.¹  While it may not sound like much, it could be an indicator that market conditions are beginning to shift. Anyone who has been sitting on the real estate sidelines waiting for the “perfect” time to buy may miss that opportunity if they wait much longer.

WHAT’S A BASIS POINT? AND WHY SHOULD I CARE?

A basis point is equal to 1/100^th of 1%. In terms of interest rates, when you apply even a small increase over thousands of dollars in a typical mortgage, the net effect can mean a significant bump in the monthly payment of principal and interest, and a higher cost for the loan over time. Unless you enjoy paying more for things, you should pay close attention to basis point activity.

Take a look at the chart on the right, created by the California Association of Realtors, and you’ll see a great example of what happens when an interest rate jumps by 50 basis points, or ½ percentage intervals.

WHAT’S HAPPENING WITH PRICES?

In Yorba Linda, Zillow.com reports that home prices are up over 15% compared to the same period in 2012. Furthermore, the city’s 2013 sales volume increase is nearly a full percentage point higher than Orange County as a whole²; Yorba Linda homes are in high demand! Of course, if you read last week’s blog, you already know some of the reasons why.

Even more telling of a possible market shift is DataQuick’s report that Southern California median home prices in April nearly reached a 5-year high.³ 

MAYBE I’D BETTER GET MOVING!

If you think it’s time to get moving before rates and prices move any higher, you may be right. Give me a call if you’re ready to start looking for your next home in Yorba Linda. I’ve lived in this wonderful community for over 15 years and would love to help you find your home here, too!

Nanette Shapiro

(714) 924-0781

nanette.shapiro4@gmail.com

www.homesbynanette.com

¹http://www.zillow.com/mortgage-rates/ca/

^2,3http://www.dqnews.com/Articles/2013/News/California/Southern-CA/RRSCA130514.aspx

Tax Season For Homeowners

It's Tax Season for Homeowners!

Spring is in the air, and for most of us that also means it is tax season. Without a doubt, planning and preparation are the two best tools to ensure you don’t pay more than your fair share at tax time, and nowhere is this more relevant than in real estate. Whether you’re a buyer or seller, real estate transactions can trigger a variety of tax situations. Depending on how well you plan and prepare will determine your tax outcome for the following year, and especially the year when you sell your property.

TAX ISSUES FOR BUYERS

Aside from providing a place to live and a retreat from the daily "grind," home ownership affords a number of immediate well-known tax advantanges:

• Mortgage interest and loan points are deductible on both primary and second homes.
• Mortgage insurance premiums may be deductible.
• Property taxes are deductible on primary and second homes.
• Home offices may be tax-deductible.

Keep in mind, however, in 2013 buyers with income exceeding the threshold of the "Pease Limitation" ($250,000 single; $300,000 married/jointly) could find their mortgage interest deductions reduced.

TAX ISSUES FOR SELLERS

Home sellers can typically expect to pay tax of 15-20% on any gains over the first $500,000 on their primary residence if married filing jointly, or $250,000 if filing singly. The final rate is determined by your income level and filing status. But how are gains calculated?  The IRS states:

“To figure the gain or loss on the sale of your main home, you must know the selling  price, the amount realized, and the adjusted basis. Subtract the adjusted basis from the amount realized to get your gain or loss.”

Your property’s basis factors any improvements you’ve made (not general repairs required from normal wear and tear) such as room additions, interior modernizations, landscape improvements (sprinkler systems, fencing where none previously existed, swimming pools, etc.), and heating and air conditioning, electrical, plumbing or insulation upgrades. Some energy-saving improvements can also qualify for a tax credit. 

With all the improvements you'll likely make over all the years you'll own your home, it is VERY important to keep accurate records of these expenditures for as long as you own the property. This little bit of planning and preparation will help you accurately calculate the property's basis when it is eventually sold.

On a final note, you should be aware that Congress passed new legislation for 2013 that imposes a 3.8% tax on certain gains, including real estate, for individuals with adjusted gross income above $200,000 or couples filing jointly with income above $250,000. For more detailed information, visit the Internal Revenue Service website or read IRS Publication 530 – Tax Information for Homeowners.

The information provided here is not guaranteed and you should always consult with your tax professional before making any financial decisions that could affect your tax liability.

Nanette Shapiro

714-924-0781

nanette.shapiro4@gmail.com