Market in a minute.

 

For the Week Ending August 28, 2015
 
Please enjoy this quick update on what’s happening this week in the housing and financial markets.


Stock market volatility shook the markets with record lows and record highs. The volatility may delay the Fed’s intended policy rate increase until later this year.
The number of unemployment claims fell more than expected, pointing to a steadily firming labor market. Labor improvement supports Fed policy changes.
The second estimate for Q2 GDP is sharply higher than the first estimate and stronger than expected. Good economic news can lead to rate increases.

New home sales rose in July, recovering from a slide in purchases in June. Demand is attributed to a healthy job market and low mortgage rates.
Average median home prices rose in July 4.5% year-over-year. By most estimates, this is a more sustainable pace than 2014’s double-digit increases.
Consumer confidence rose to a 7 month high in August. Confidence suggests strength in the housing markets.

Check out all Mesquite NV listings at www.mesquite-realestate.com

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Weekly Market Preview, What’s on the agenda for this week?

Weekly Market Preview

What’s on the agenda for this week?

The global equity markets continued their sell-offs today. China leading the way down just as it led global equity markets higher from 2009. China trying to stop the decline in its markets reduced bank reserves to increase lending; a fool’s attempt to stop their markets and economy frm declining more. The infection began to spread globally two weeks ago when China surprised the world by de-valuing its yuan. Treasuries gaining as investors seek the relative safety of government bonds, today feeding into MBSs after Friday’s rather subdued improvement in MBS prices. This is the major correction we have been expecting for over a month now, having no idea when it would happen. US and global markets were very over-valued, trading on central bank market manipulations for the last five years. Now it is panic in equities as the reality has set in rapidly. Global economic growth, even with the central banks running printing presses at warp speed, cannot override reality that growth hasn’t been as strong as the headlines had been indicated.

This is the natural and unavoidable aftereffect of a global liquidity bubble brought on by central banks the world’s main central banks. Over the last few months the data reported didn’t faze central bankers, especially our Fed; we have noted before the central banks were treading on ground they had no idea how it would play out; there has not been a condition like this since the depression. With all of those platitudes frm almost every US Fed officials, it was just hoping and guessing but eventually reality always come to the top of the boiling pot. There are numerous thoughts floating around over the last week about why the collapse of equity markets. Let’s not make too much out of it trying to figure it out looking at all of the “rationale” being spewed now; no matter how deep you go in divining the reality, all we need to realize is that the economies of the world are not nearly as strong as those headlines that investors put huge faith in. Numerous examples floating now; the one that has always been crap to us; the unemployment data. Unemployment has been touted by Wall Street and brokerages and economists and analysts and cab drivers as evidence of economic growth, the fact is jobs have increased but quality stinks—and most everything feeds frm there. Another way to look at what is going on now and last week in equity markets; all of them were over-bought based on current earnings and future outlooks. This is the correction well overdue.

At 9:30 the DJIA opened down 985, NASDAQ -367, S&P -95. The 10 10 yr note yield at 1.91% -13 bps frm Friday’s close; 30 yr MBS price +56 bps frm Friday’s close and +62 bps frm 9:30 Friday. Within 10 minutes of the open stock indexes in an extremely volatile trade jumped 100 points frm the low at the open, NASDAQ also came off its low and jumped a 100 points. Today will be very volatile, look at the 10:15 prices below, how indexes have come well off their panic lows at the open.

Expect volatility today and through the rest of the week. Already today the 10 yr note yield range, the low at 1.90% the high 1.99%. MBS price at its best up 56 bps, but the price has dropped back to +25 bps. Floating today and through the week should not be taken easily, if you are looking for good rates and prices and floating it won’t be without a lot of angst.

This Week’s Economic calendar:
Tuesday,

– 9:00 am June Case/Shiller 20 city (yr/yr +5.2% frm 4.9% in May)
– – June FHFA home price index (+0.4%)
– 10:00 am July new home sales (+6.6% to 516K units)
– – August consumer confidence (94.0 frm 90.9)
Wednesday,
– 7:00 am weekly MBA mortgage applications
– 8:30 am July durable goods orders (-0.4%, ex-transportation orders +0.4%)
Thursday,
– 8:30 am weekly jobless claims (-7K to 270K)
– – Q-2 prelim. GDP (+3.2% frm +2.3% frm advance report last month)
– 10:00 am July pending home sales (+1.0%)
Friday,
– 8:30 am July personal income and spending (income +0.4%, spending +0.4%)
– – July personal consumption expenditures (core +0.1%)
– 10:00 am Aug final U. of Michigan consumer sentiment (93.3 frm 92.9)
– – Jackson Hole Symposium begins today

PRICES @ 10:15 AM

10 yr note: +22/32 (69 bp) 1.96% -10 bp (low today 1.90%)

5 yr note: +13/32 (41 bp) 1.34% -9 bp

2 Yr note: +4/32 (12 bp) 0.56% -5 bp

30 yr bond: +34/32 (103 bp) 2.68% -6 bp

Libor Rates: 1 mo 0.199%;3 mo 0.329%; 6 mo 0.529%; 1 yr 0.847%

30 yr FNMA 3.5 Sept: @9:30 104.66 +56 bp (+62 bp frm 9:30 Friday)

15 yr FNMA 3.0 Sept: @9:30 104.09 +16 bp (+13 bp frm 9:30 Friday)

30 yr GNMA 3.5 Sept: @9:30 104.70 +41 bp (+40 bp frm 9:30 Friday)

Dollar/Yen: 118.46 -3.85 yen (dollar weakening rapidly these days)

Dollar/Euro: $1.1593 +$0.0207 (ditto above)

Gold: $1,164.70 +$5.10

Crude Oil: $38.26 -$2.19

DJIA: 15,979.45 -480.30 (-1,000 on the opening)

NASDAQ: 4548.30 -157.74 (-367 on the open)

S&P 500: 1909.92 -60.97 (-95 on the open)

 

 

Check out all Mesquite NV listings at www.mesquite-realestate.com

 

The Market in a minute.


For the Week Ending August 21, 2015
Please enjoy this quick update on what’s happening this week in the housing and financial markets.


The Consumer Price Index rose slightly in July, but inflation is still not a concern. Inflation leads to higher rates, so no risk of inflation helps rates remain low.
The minutes from last month’s FOMC meeting showed the Fed is struggling to justify raising policy rates. Expectations of a September rate increase are falling.
Problems in China’s economy and low oil prices are causing global concern. Mortgage bonds are benefitting from the weakness, supporting lower rates.

The Homebuilder Index rose to its highest level in almost a decade. Homebuilders view market conditions as favorable and are optimistic about future sales.
Housing starts rose to a near 8-year high in July, led by construction of single-family homes. A strong housing market indicates an improving economy.
Building permits were down slightly in July, but that follows three straight months of hefty increases. Permits are expected to improve again for August.

Check out all Mesquite NV listings at www.mesquite-realestate.com

Key Emotions To Evoke When Selling A Home

The Two Key Emotions To Evoke When Selling A Home

When it comes time to choose the price you ask for your house, I strongly encourage you to give this some serious thought.

Our studies show that a house priced correctly at the onset of the initial marketing plan will, on average, yield 6% to 8% more for the seller than one in which the seller prices high and then reduces until it sells.

There are many reasons (we believe) that the seller will eventually get less, but it usually comes down to a combination of a few key factors, fear and greed.

Why Fear and Greed Rule The Housing Market

We advise our house selling customers that fear and greed rule the housing market (just as they do in every other market). Both the seller and the buyer(s) must deal with both of these emotional forces that can wreak havoc on a house sale.

For the seller, there is no fear when they first enter the market. They want to get above top dollar and they certainly are not willing to give the house away. They often do not understand that greed will cause them to over-price their house, asking an amount that will lure the WRONG buyers to their house. As time goes on and their house does not sell, greed is replaced by fear which can cause them to capitulate to an offer that is lower than what their house is worth. If you think this cannot happen to you, you are like all the seller’s who sold below market when fatigue set in after months or years of being on the market without a buyer.

For the buyer, greed will cause them to low-ball a well-priced house. Most new-to-the-current-market buyers want to try to buy a house at far below market value, a form of greed that often causes them to lose in a negotiation war to another buyer (or to receive a counter offer from the seller that is far higher than the seller is willing to take). As time progresses and they tire of the difficulty of house shopping and the consistent losses in negotiation, it is fear that causes the buyer to bid too high on a house they could have bought for less. If you think this cannot happen to you, you are like the scores of buyers who work with the wrong agent and who look at the wrong houses, and then fail to make compelling offers.

So the new seller and the new buyer, unless well-educated by their real estate agent, typically allow fear and greed to bring them harm.

Why Smart Sellers Make More Money

Smart house sellers recognize how the market runs. They use their initial asking price to activate the fear emotion of the ready-buyers for their houses. If you understand this concept, then you understand why we advise house sellers to get top dollar for their house, they need to plan to sell a house in just 4 to 14 days.

94% of the prospective buyers for your house are using the internet to select which houses to visit, and they aren’t stupid. Buyers are not going to choose to come see your house if it does not compare favorably with those priced similarly.

When you over-price your house, even by “just a little,” you make buyers compare your house to those that are nicer. In all my years of experience, buyers prefer the nicer houses.

So how does this relate to fear and greed?

How To Stimulate The Fear Emotion Among Homebuyers

For most areas and price ranges, there is one or more buyers waiting in the wings, looking at every deal that hits the market in their chosen neighborhood. They understand values better than most Realtors (for their selected neighborhood), and they are ready to jump when the next one hits the market.

So why are they ready to pounce? Because they are seasoned buyers, and they already lost one or more in your neighborhood when “greed” was in control. But they are tired of losing out, and they want a good house.

If you price your house to sell, it will look like the middle house in the picture on the right. Your house will be the obvious best-buy, and buyers will jump on it and make a full-price offer or higher. Why? They are fearful of losing your house to another buyer.

But if you hit the market over-priced, they know you won’t sell right away, so they are in no hurry to bring an offer (or even look at your house that compares poorly to the good ones priced at the same level).

Fear and greed are great emotional motivators, make sure you put yourself in a position to use them to your advantage. Want to know other ways to get top dollar for your house when you sell? Simply drop me a note and we’ll set a time to discuss the best ways of selling your house.

Check out all Mesquite NV listings at www.mesquite-realestate.com

Remember those who have given the ultimate sacrifice for freedom.

 

A story in pictures ( one of a kind wife…


FOCUS ON THE MAN IN THE FIRST PICTURE. . .IT’S HIM
THROUGHOUT THE SERIES BELOW. . .
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he is a hero………..and she is an angel.
DO NOT HOLD ON TO THIS OR PRESS DELETE.
SOMEONE HAS TO HOLD OUR COUNTRY IN THEIR HANDS.
SEND THIS ON, AND ON AND ON.
If you care to offer the smallest token of recognition and appreciation
for our military, please pass this on and remember the men and women who have served
and are currently serving our country.
Remember those who have given the ultimate sacrifice for freedom.

A Crash Course in Tax and Investment Property

A Crash Course in Tax and Investment Property

by Jason Van Steenwyk on March 3, 2012

One way or another, Uncle Sam is going to get his cut. Count on it. And so will your state and local governments. That said, there are certain things you can do as a real estate investor to help manage your tax bill, and maximize your after-tax return on your investment.

In order to do so, however, you need to understand the primary ways in which investment real estate portfolios get taxed. You must also have a general grasp of some abstract concepts like calculating your tax basis, as well as the depreciation of capital investments. Hey, if this stuff were easy, we’d all be CPAs, right?

Warning: This article will only arm you with enough information to be dangerous. You can click on any of the links for more detailed information directly from the Internal Revenue Service. This article is not going to make you an expert. But you can become conversant with the basic terminology, so you can be better prepared for a meeting with your tax advisor.

Taxation of Rental Income

The IRS taxes the real estate portfolios of living investors in two primary ways – income tax and capital gains tax. (A third way, estate tax, applies only to dead investors, and will be left for another article).

Rental income is taxable – as ordinary income tax. That means you have to declare it as income on your tax return, and pay income tax on it by April 15th of the year after the year you receive it. (Corporations may have to declare this income quarterly).

Rental income receives better tax treatment than income earned from wages – you don’t need to pay FICA taxes on rental income, while you do have to pay FICA on wages you get from a W-2 (and double FICA on self-employment income!). It’s almost as if the system is rigged against the working man!

Your income is everything you get from rents and royalties on the property, minus any deductible expenses. You can’t deduct everything, though – you can only deduct mortgage interest and repairs you make that restore the property to its original minimally functional condition. You can’t deduct capital investments like new buildings, additions, or renovations. More on these later.

Capital Gains Tax

The second tax bill you need to worry about is capital gains tax. The IRS taxes you on any net profits you get out of a property when you sell it. If you’re “flipping” properties and you own the property less than a year, you pay short-term capital gains, which is the same rate as your marginal income tax rate. If you’re in the 28 percent tax bracket, you’ll pay a 28 percent tax on short-term capital gains. And you’ll like it, by God!

Ok, maybe not. But you’ll pay it. Unless you can hang on to the property for at least 12 months. In that case, you will qualify for more favorable long-term capital gains. Depending on your marginal income tax bracket, these taxes could range from zero to 15 percent. In every bracket, however, Uncle Sam takes a smaller cut out of long-term gains than out of ordinary income or short-term gains. And once again, we see the system favors the landlord investor over the worker.

Calculating Capital Gains

You pay capital gains tax on the difference between your selling price in the property and your tax basis. Your basis in a property is the total amount of dollars you have invested in the property for which you have not taken a deduction, from your purchase price to the amount invested in renovations and improvements (including labor costs on these projects!). If you have deductions associated with the property, you subtract them from your tax basis. If your basis is higher than your sale, you have a capital loss. You can subtract losses from a given year from gains to reduce your tax bill. If you have more losses than gains, you can “carry forward” these losses into future years, to cancel out capital gains in future years and then to cancel out up to $3,000 in income. (Note, if you take a capital loss on a property, you cannot buy the same or substantially identical property back for at least 30 days, under so-called “wash sale” rules.

How To Defer Capital Gains Taxes – Indefinitely! An Intro to Like-Kind Exchanges

The IRS provides an important exception to capital gains taxation, made-to-order for real estate investors: If you own an investment property, you can sell your property at a profit and roll your money over into another property within 60 days without having to pay capital gains taxes at all – a transaction known as a Section 1031 exchange, named for the section of the U.S. Revenue Code that allows it. It has to be a property of “like kind.” You cannot swap your rental property for a personal residence, or vice versa. For this reason, these exchanges are sometimes called like-kind exchanges.

The 1031 exchange makes it possible for real estate investors to defer paying capital gains tax almost indefinitely – which is another advantage over investing in mutual funds, stocks, bonds and other securities or collectibles. Outside of a retirement account, you have to pay tax on gains in these items by the April 15th in the year after you sold them.

Depreciation and Amortization

This is a broad concept, so we can only cover the very basics here. When you buy investment property – be it a building, a computer or a horse – the IRS knows that the item won’t stay young and new forever. Over time, the property will decrease in value. Depreciation is the process of claiming a deduction to compensate you for the property’s decrease in value during the year. Note: You can’t depreciate your personal residence. You can only depreciate investment property. For more information on the process of depreciation, see IRS Publication 946 – How To Depreciate Property.

Land, of course, doesn’t depreciate. But minerals underneath the land do. If you are extracting oil or other minerals, or timber, for that matter, from the land, you will account for the gradual loss in value through a process called depletion.

Likewise, when you make a purchase of investment real estate or capital equipment with a useful life of longer than a year (hopefully that applies to all your real estate!), the IRS knows you will be using that property to generate income for a long time to come. Except in certain circumstances, then, the IRS does not allow you to deduct the full cost of your investment in the first year. Instead, you must amortize your investment over a number of years. For cars, you have to spread your deduction out over five years. For real estate, you must spread the deduction out over 25 years. For more information on how to account for amortization and depreciation on your tax return, you can download the IRS instructions.

Passive Activity Rules

Again, these rules are complex. But in a nutshell, if you are a passive investor – meaning you are not working day to day in the business of managing your real estate investments – you are subject to passive activity rules. Basically, you can only deduct passive losses to the extent you can cancel out gains from passive activities. These rules restrict your ability to use passive activity losses to offset capital gains elsewhere in your portfolio. Congress implemented these rules in 1986 to eliminate tax loopholes and abusive tax shelters. So thank your parents and grandparents for ruining it for you. And their accountants.

Most individual investor landlords can deduct up to $25,000 per year in losses on rental properties, if need be. Hopefully you won’t have to make use of this provision much.

Property Taxes

Just as Uncle Sam takes his cut, so do his local nieces and nephews. Expect to pay property taxes to local and county governments each year.  Your local government will assess the market value of your property at its “highest and best use,” and charge you a percentage of that value every year. You can deduct property taxes against your rental income, though, provided the property tax is uniformly assessed throughout the jurisdiction and is not a special assessment.

Other Tax Deductions

Be on the lookout for opportunities to take deductions for these common real estate investment expenses:

  • Mortgage interest
  • Tax advice and preparation fees
  • Legal fees for business purposes (but not for personal reasons)
  • Mileage
  • Business use of your home (the home office deduction)
  • Advertising fees
  • Employees (but if they are working on capital improvements or renovations, you have to amortize their labor costs as part of your capital investment, rather than as a current year expense.)