Evanston creates jobs to help with HUD financing

It’s been a couple of months since I mentioned that Evanston was to receive about  $18 million in government assistance through grants that would take care of some foreclosed and vacant property.  Well, now Evanston is working with HUD (the U.S. Department of Housing & Urban Development) to figure out the process to qualify eligible workers and businesses to help with the rehab and development of this property.

There are about 100 housing units considered foreclosures or now vacant that will be part of the rehab project.  Brinshore, a Northbrook developer, will assist with the project.  Evanston plans to make these units available for rent or possible sale, after a rehab, of course.

So now the city is looking for contractors to work on the units.  The government expects that residents of Evanston be used as much as possible.  Evanston City code requires that at least 25% of contracts go to Evanston-based contractors, minority-owned, or women-owned.  Projects can range anywhere from roofing to painting to HVAC to complete rehabs.

Subcontractors can bid directly on work at the city’s Web site.  As work is needed, the city will post the opportunities online.  So they’re asking workers to check the site regularly for new opportunities.  Workers will need to be licensed and will need to provide information on years in the business, past work, etc.

While some may think that 25% of the work needing to be done by Evanston-based, minority-owned, or women-owned businesses is too much, I think it’s great.  Who better to help beautify the city than residents of the city?  They’re the ones with the deepest roots here and have much more to gain.  It will help bump up employment rates, too. 

I am also a fan of the fact that they’re spacing out the bids with new opportunities popping up as needed.  This gives everyone a fair shot at bidding on projects, rather than having lost opportunities for those with slower Internet access or busy on a job one day. 

Do you think this is a step in the right direction for Evanston?  Please leave a comment below or visit me online. Also, thanks to the Pioneer Press for a lot of the information.

Have a happy and safe Memorial Day!

Congress considers possible real estate tax burdens

Congress is considering two new tax burdens, both of which will have a significant effect on real estate and real estate owners. 

The first will mainly affect those who are landlords or those who own rental properties.  Anyone owning real estate that collects rental income will be affected.  If you have had any work done by anyone on your rental property, you would be required to fill out the proper 1099 forms for all service providers who performed work on the property.  This can include regular handymen, roofers, electricians, painters, etc.  You must have paid them at least $600 in the last calendar year.  Landlords would be charged a penalty for failing to fill out these forms.  Most people haven’t used these forms before and could require them to have to hire a tax professional for assistance.  This creates a financial burden on many.

The second proposal is to tax carried interest rates at a higher rate than the current capital gains rate.  This is when you go to sell an investment property and are taxed on any money you have gained.  For example, if you bought a property for $100,000 and later sold it for $200,000, you have gained $100,000, which is what you’d be taxed on.  This money is considered a capital gains, and taxed at a lower amount.  Congress is proposing to get rid of the capital gains rate.

The National Association of Realtors strongly opposes these two proposals.  Aside from not wanting to see clients negatively affected by this, the market is still in flux.  We’re still dealing with many foreclosures and home values decreasing across the country.  These proposals will only delay getting the market back to a stable position. 

We’re asking for you to write to your senators and Congress representatives to let them know how strongly you oppose this.  I’ve included a sample letter below, thanks to Creative Real Estate Investing Guide.  Please let them know your thoughts on this issue.  You can find the contact information for your State representatives here. I’d also love to hear any comments.  You can leave a comment or visit me online.

Sample letter:

Dear [decision maker name inserted here],

I am a property owner and your constituent. Reports indicate that Congress may vote this week on a spending and tax measure that could include two harmful tax provisions directly affecting real estate. I urge you to oppose these changes.

The first would require that ALL landlords provide an IRS Form 1099 to all contractors they do business with if they pay that contractor $600 or more in any given year. The proposal would apply even to those who own just one property. This is a trap for the unwary. Since many of my clients are “little guys” looking to supplement their income with real estate investments, any proposal requiring them to file Forms 1099 would impose new expenses and subject them to penalties they are ill-equipped to pay. Often these small landlords don’t use tax professionals; if adopted, this proposal could force them to incur the expense of hiring tax professionals. This proposal is burdensome and overreaching. Oppose it.

I also oppose a proposed change to tax carried interest at ordinary income rates. A real estate investment however, is fundamentally different from a hedge fund or financial instrument investment. An investment in real estate is nothing like playing with other people’s money. Real estate is a fixed asset held for a long period of time. The worst thing about this proposal is that, for the first time, a particular type of real estate investment gain would no longer qualify for capital gains treatment. This is a terrible precedent. Oppose it.

The real estate industry, in all its commercial, multi-family and individual investment categories, is still very fragile and likely to remain so. These proposals are ill-advised, inopportune and potentially destructive. Keep our real estate market recovery on track by opposing these measures.

Sincerely,

[Your name here]

Billionaire makes bold prediction

Last week I wrote about how the low mortgage rates were helping to increase the number of homes sold across the country and that the number of foreclosures was slowly decreasing for the first quarter of 2010.  I also mentioned that while homes are selling, values are not increasing, nor are they expected to any time soon.

Also, last week, John Paulson, a billionaire hedge fund manager and president of Paulson & Co., said he expects housing prices to rise 3 to 5% this year and another 8 to 12% next year. 

Let me give you a little background about Mr. Paulson before I comment on that.  His company one involved in the Securities and Exchange Commission’s civil fraud case against Goldman Sachs.  From Law.com, “The Securities and Exchange Commission on Friday charged Goldman Sachs Group Inc. and one of its vice presidents for defrauding investors. The complaint alleges that the company misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing bubble was beginning to burst in 2007.

The SEC said Goldman Sachs marketed a financial product, called collateralized debt obligation or CDO, to investors without telling them that a major hedge fund that was betting against the mortgage market had played a key role in selecting the portfolio.

The hedge fund, Paulson & Co., paid Goldman Sachs about $15 million to structure a transaction in which Paulson could take short positions against mortgage securities which it helped choose. While investors lost about $1 billion on the CDO, Paulson earned about $1 billion by betting against it, the complaint states.

The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible by structuring the transaction, preparing the marketing materials and communicating directly with investors. Tourre knew that Paulson’s interest in the CDO directly conflicted with the interest of investors, the complaint says.”

Paulson says that his company tracks housing prices in California and believes that California is the best indicator of what’s going on with the rest of the country and what will happen within the next six months.  How is this true?  Every state and even every area and neighborhood is different.  Some states are experiencing tons of foreclosures, like California and Florida, while other states are barely registering any.  You can’t take the example of an entire state and base numbers on that.

While I would be thrilled if prices started climbing (more so to help owners start seeing value in their homes), this is such a great time for buyers to take advantage of the situation we’re in now.  They can get homes at incredible values.  This might not be a time we’ll ever see again.  If you have the credit and money to purchase a house now, imagine what it could be worth 20 or 30 years from now.

I haven’t seen values climb in the markets I’m working in.  If you bought a home a couple of years ago and are trying to sell now, most likely you’re not even selling for more than you paid for it.  It’s unfortunate that sellers don’t have the equity they need.  But, again, while now may be considered a buyer’s market, we should hopefully turn around to a seller’s market down the road.  However, I don’t see that happening this year or next.  Maybe 2012.

I’d love to hear what your thoughts are.  When do you see prices turning around?  Do you think Paulson’s prediction will be true?  More on this can be found here. Please leave me a comment or visit me online.

Positive mortgage news for the week

Lots of good news on the mortgage front this week.  First of all, rates are currently at their lowest than they have been in 6 weeks.  Freddie Mac said that the average rate for 30-year- fixed mortgages was 5%.  Last week it was 5.06%.  Still not as great as last year when it was 4.84% but definitely still low comparatively.   Those interested in adjustable rate mortgages will be happy to hear that those rates are down as well, with an average of 3.97%.  This is definitely worth looking into for buyers who are planning to buy but know ahead of time they don’t plan on staying for more than a few years in that home. 

The other good news is that for the first time since 2006, late mortgage payments have dropped.  Could this be the first sign that the housing market may start to turn around?  The number of houses selling is definitely increasing.  It’s just values that are still a lot lower than expected and more foreclosures popping up.  But if people aren’t having as much trouble, whether that’s because of loan modifications or other assistance, we might see the number of foreclosures decrease in the near future, allowing values to steadily climb back up.

Credit Reporting Agency TransUnion says, “We cannot characterize it as a trend yet, but we anticipate that things will continue to improve.”  They say creation of jobs and more people out of the unemployment line could be contributing to this news.  TransUnion measures the rates by payments that are at least 60 days late.  They’re estimating a possible rate of 6.3% of late payments by the end of this year.  It’s currently 6.77% and was 6.89% in the fourth quarter of 2009.

They’re thinking it could be as low as 5% by the end of 2011.  Late mortgage payments in the past (before we hit the housing market situation we’re in now) were as low as 1.5% or 2%.  Those states with the highest amount of late payments include California, Florida, Arizona, and Nevada, which is at 15.98%.  The two states with the lowest percentage are North Dakota and South Dakota.  You can read more about TransUnion through USA Today’s page here.

While the first time buyer tax credit is expired if you’re still looking for a home, don’t forget you can take advantage of Coldwell Banker’s seller assist program, earning up to $8,000 back for certain properties.  Please visit me online for more info.

Coldwell Banker’s plan to extend the tax credit

As an agent of Coldwell Banker, I wanted to talk about what my company is doing to continue to stimulate the housing market.  With the tax credit expiring last week, starting on Saturday, they announced a Buyer Bonus Sales Event.  Since many agents had buyers who would have missed out on the credit if it had really expired when it was supposed to in November, Coldwell Banker decided to do something about it since it did expire on Friday.

Sellers participating in this event will offer a credit of 3% (up to $8,000) for buyers at closing.  The contract has to be signed prior to July 31, 2010, but right now there is no set deadline on a closing.

Jim Gillespie, the president and CEO of Coldwell Banker Real Estate LLC said, “Without restrictions such as household income caps, the Coldwell Banker Buyer Bonus Sales Event allows for greater participation for all homebuyers.  And our sellers have a unique opportunity to allow their home to stand out from the competition in their marketplace.”  So no one is limited by this event.  Anyone (first time buyers or repeat buyers) can take advantage of this bonus.

To find a home participating, you can go to the Coldwell Banker Web site and check the box labeled Buyer Bonus Properties in your search criteria.  As you drive around neighborhoods you’re looking at, you can also see those that have a special rider on their yard signs.  Feel free to call your local office to find out if the property you’re interested in is participating.

Sellers planning to sell their home and want to participate, be sure to let your agent know.  You’ll get the benefit of national television advertising, promotion on the Web site, as well as social media outlets such as Facebook and Twitter.

This is a great chance to get some money back if you were unable to participate in the government’s program.  If you’re interested in selling or buying, please be sure to visit me online.