IRS Institutes Chines drywall Deduction

The Internal Revenue Service (IRS) is trying to provide some relief to homeowners plagued by corrosive Chinese drywall. Issued last week, Revenue Procedure 2010-36 enables affected taxpayers to treat damages from corrosive drywall installed in homes between 2001 and 2009 as a casualty loss and provides a ”safe harbor” formula for determining the amount of the loss.

Since late 2008, the US Consumer Products Safety Commission (CPSC) has received more than 3,500 reports from residents in 38 states, the District of Columbia, and Puerto Rico regarding defective Chinese drywall. Gases emitted from Chinese drywall are being blamed for significant property damage, including damage to HVAC systems, smoke detectors, electrical wiring, metal plumbing components, and other household appliances.

According to a statement from the IRS, Revenue Procedure 2010-36 provides the following relief:

• Individuals who pay to repair damage to their personal residences or household appliances resulting from corrosive drywall may treat the amount paid as a casualty loss in the year of payment.

• Taxpayers who have already filed their income tax return for the year of payment generally have three years to file an amended return and claim the deduction.

• The amount of a loss that may be claimed depends on whether the taxpayer has a pending claim for reimbursement (or intends to pursue reimbursement) of the loss through property insurance, litigation or otherwise.

• In cases where a taxpayer does not have a pending claim for reimbursement, the taxpayer may claim as a loss all unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances resulting from corrosive drywall.

• If a taxpayer does have a pending claim (or intends to pursue reimbursement), a taxpayer may claim a loss for 75 percent of the unreimbursed amount paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that resulted from corrosive drywall.

A taxpayer who has been fully reimbursed before filing a return for the year the loss was sustained may not claim a loss. A taxpayer who has a pending claim for reimbursement (or intends to pursue reimbursement) may have income or an additional deduction in subsequent taxable years depending on the actual amount of reimbursement received.

For purposes of this revenue procedure, the term “corrosive drywall” means drywall that is identified as problem drywall under the two step identification method published by the CPSC and the Department of Housing and Urban Development in their interim guidance dated January 28, 2010, the IRS said.

Steve Geving
Jones and Co Realty
239-573-1400
www.nextgenerationrealtygroup.com

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Where is the shadow home inventory?

Where is the shadow inventory?

WASHINGTON – Sept. 20, 2010 – For the last year, the real estate industry has been talking about shadow inventory and the coming flood of distressed properties. Where are they?

Here’s what’s happening, according to a recent paper by Alan Mallach, a senior fellow the Brookings Institution:

• Some delinquencies have been resolved through loan modifications or people working out the problems on their own.

• Banks are getting better at managing short sales.

• Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market.

The likeliest outcome, Mallach predicts, is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices – but it will probably lead to low or no appreciation in home prices for a while.

Source: The Wall Street Journal, Nick Timiaros (09/16/2010)

© Copyright 2010 INFORMATION, INC. Bethesda, MD

Steve Geving
Jones & Co. Realty
239-573-1400
www.nextgenerationrealtygroup.com

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NFIP expires soon, Is Congress watching the weather?

WASHINGTON – Sept. 20, 2010 – The National Flood Insurance Program (NFIP) will expire on Sept. 30, which, unless stopped by Congress, will mark the fourth time this year. Critics have decried Congress’ slow response to not only extend the program long-term, but also for failing to pass substantial reforms.

By allowing the program to lapse, homeowners with flood insurance could lose coverage if they can’t renew, though Congress has historically made a renewal retroactive.

Additionally, some home sales can’t go to closing if the lender requires flood insurance coverage because a property sits in a flood zone. That problem was particularly acute on April 30 of this year as homebuyers faced a deadline for the $8,000 stimulus credit for first-time homebuyers.

Critics say the flood insurance program should be extended for at least 12 months; and once that is accomplished, it must be reformed so that it remains on solid financial footing.

Currently, flood insurance coverage limits are low, there is no coverage for loss of use, and rates are inadequate to cover potential losses. Reform before Sept. 30 should be a top priority for Congress, given the recent weather forecasts and the number of hurricanes and tropical storms forming in the Atlantic Ocean.

Steve Geving
Jones & Co Realty
239-573-1400
www.nextgenerationrealtygroup.com

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When will the housing market grow?

On this day in the year 1087 A.D. one of the most notable characters in the history of Western civilization died. (While we don’t do “deaths” ordinarily, this had a level of absurdity that may have even exceeded its regal/notoriety – a kind of “Monty Python buries the King.”)…..Okay! Okay! I’ll get to the point.

A few weeks before this day, William the Conqueror (see successful invaders of British Isles – short list) was traveling in France. The citizens of Mantes (see local town – bad attitude) hung out signs unwelcoming Willy. Since this was before the age of political correctness, the signs read – “Go home you bastard” (in Medieval French, of course – noting the unsanctioned mating of his parents) and “Buzz off you pregnant sow” (again in Medieval French and alluding to an odd weight problem he had since infancy which made him look like he was shoplifting a gargoyle under his armor).

Lacking a sense of humor, said William the C proceeded to burn Mantes to the ground. As he rode triumphantly among the ruins, his horse hit a hot ember. The horse rolled over crushing the saddle horn against the royal rotundity. The blow was so strong it caused an internal puncture of the intestines. (Hang on – here comes Monty Python.)

His doctors fed him sweets and wine unknowingly helping to compound his infection. For several weeks his pain increased as did the size of his stomach. Finally, on this day he died. The royal court, fearing a posthumous revolt, headed for home. The royal servants seeing no one to see them stripped the royal chamber and then the royal body – of clothing and jewelry. All this while the infection in the royal cadaver continued to grow.

Finally, a delegation of Bishops, Abbotts, Friars, et. al., arrived to bury his ever-swelling majesty. As they rolled the royal coffin toward the altar, a small problem ensued. Tradition said the coffin should be closed. But the infected royal cadaver continued to swell even after being dressed and en-casketed.

First the altar boys tried to close the casket. Then progressively more of the religious and well intentioned assisted. With everyone pushing down, the skin surrounding the massive intestinal infection burst unleashing fluid and odor driving everyone out of St. Stephen’s Church in Caen and ultimately out of Caen itself. People reportedly came back into town after only a day or two and a few reportedly even re-entered the church in less than a month. After the burial it is said nothing grew on the grave for three years.

That great historical story by Art Cashin reminds me of the housing market.  I look around Southwest Florida and see a great inventory of houses for sale at 40-60% of construction cost.  The great deals are being swept up by investors, foreign buyers, retirees, and seasonal visitors but when is the local market going to participate?  My guess is that the locals will jump into the housing market when construction starts to resume and prices are again on the rise.  Don’t hesitate, the number of foreclosures and distressed properties are reducing and housing prices are already starting to rise.

Steve Geving
Premiere Plus Realty Co
www.nextgenerationrealtygroup.com

Serving Cape Coral, Fort Myers, Bonita Springs, Estero, Sanibel, Captiva, Lehigh Acres, Pine Island and Punta Gorda

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Florida Consumer Confidence Up 1 Point

Fla. consumer confidence up 1 point

GAINESVILLE, Fla. – Sept. 1, 2010 – With no clear signs that the nation is either recovering or entering another recession, Florida’s consumer confidence remained stagnant, inching up only one point to 67 in August, according to a new University of Florida survey.

“Consumer confidence is entrenched at a relatively low level,” says Chris McCarty, director of UF’s Survey Research Center in the Bureau of Economic and Business Research. “With the exception of a jump in April due almost entirely to the housing and appliance rebate programs, consumer confidence has been stuck in the upper 60s to low 70s for the past year. We are in the economic doldrums.”

Two of the five components of the index increased, while one decreased and two remained unchanged.

Perceptions of personal finances now compared with a year ago rose four points to 52 from a record low in July, while perceptions of personal finances a year from now rose three points to 78.

“On the bright side, the oil spill has been contained and this is probably part of the reason for increased optimism about personal finances,” McCarty says. “Although the long-term effects of the spill are not yet known, there is evidence that tourists now realize that Florida beaches are, for the most part, unaffected.”

Remaining unchanged were perceptions of U.S. economic conditions over the next year at 61 and perceptions of U.S. economic conditions over the next five years at 70. The only component to decline was perceptions about whether it’s a good time to buy big-ticket consumer items, which fell two points to 73.

“While the mix among the five components has changed, overall consumers’ attitudes reflect other economic indicators that don’t show a clear path out of recovery or back to another recession,” McCarty says. Unemployment, the stock market and housing prices all add to the state’s economic uncertainty.

Florida’s unemployment rate still remains high, having risen .1 to 11.5 percent in July, McCarty said. Also last month, the stock market fluctuated wildly, mostly downward, as unexpectedly pessimistic news about existing and new home sales rekindled fears of a double-dip recession, he says.

In other bad news, housing prices fell in July to a median price of $138,000, erasing gains from the spring that were pushed up by the federal rebate program, McCarty says. However, it seems unlikely that housing prices will continue to decline in the short term. Prices over the past year have remained relatively flat, compared with the volatility over the past three years. In addition, unemployment is not rising dramatically, mortgage rates are at record lows and the containment of the oil spill means it will be less likely to affect housing prices on the Gulf. However, if unemployment starts creeping back up, there could be a problem, McCarty adds.

On the positive side, inflation remains in check despite the massive infusions of capital from the stimulus and bailout packages. Taxable sales for June, the latest month for which figures are available, appear on track, and as other news such as the November elections dominates the headlines, the oil spill will become less of a factor for tourists and people who interested in moving to Florida.

Nationally, consumer confidence, as measured by the University of Michigan’s index, which was released on Friday, mirrors Florida, with a one-point increase, although that index is about two points higher overall, he said.

The research center conducts the Florida Consumer Attitude Survey monthly. Respondents are 18 or older and live in households telephoned randomly. The preliminary index for August was 425 responses.

© 2010 Florida Realtors®

Steve Geving
Jones and Co. Realty
www.nextgenerationrealtygroup.com

Proudly serving Cape Coral, Fort Myers, Lehigh Acres, Bonita Springs, Estero, Pine Island, Punta Gorda, Captiva, and Sanibel.

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