Archives: February 2009

How The Stimulus Plan Will Impact CT Small Businesses

The new stimulus plan includes a plan for small businesses in the manner of tax provisions and will have some favorable tax advantages for Ct small businesses.

Here are some of the highlights: 

Net Operating Loss – In what is called a “carryback” tax credit, if a business paid taxes on profits in the last five years, but lost money on net operating costs in 2008, they can apply last years loss to the prior years taxes and will likely get a refund on taxes paid in the past.

Equipment Deductions and Depreciation on Equipment – Currently, companies depreciate any new equipment purchases over a period of years. In the new stimulus bill, they will now be allowed to treat new equipment purchases as an operating expense for 2008 and can deduct the whole amount up to $250,000.  This is an increase of $117,000 over the previously scheduled limit and will be of great benefit to small business owners who may have seen their profits drop and yet still maintained and invested in their business in 2008. 

S-Corps Shorter holding period – This shortens the period that S-corp assets can be sold without paying taxes on built-in gains.  This is very important and as a direct impact will allow business owners to retire earlier without facing taxation that may have been doubled if they sold the assets earlier. A built-in gain is the difference between the fair market value of the assets and the tax basis used at the time the company put an S-corp in place.

Housing Stimulus Plan

The Homeowner Affordability and Stability Plan was announced by President Obama on February 18, 2009.  According to the National Association of Realtors there are three main elements of the plan. 

1. The opportunity to refinance for approx. 4-5 million homeowners who have loan to value ratios above 80% up to 105%.  Fannie Mae and Freddie Mac will refinance the mortgages with loans owned or guaranteed by GSEs (government sponsored enterprises).

2. A 3 year initiative to reduce the monthly payments of homeowners “at risk of imminent default” to affordable levels using $75 billion from TARP and GSEs.  The plan will only be available for borrowers with mortgages at or below the GSE conforming loan limits.

3. Supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.  The Treasury Dept. is doubling, from $100 billion to $200 billion for each GSE, its pledge to invest money to make sure the GSEs maintain a positive net worth.  The additional $200 billion is from HERA, not from the financial stability program or TARP.

January 2009 Home Sales

The Greater Hartford Association of Realtors reports that pending home sales for the region decreased by 1.59% from January of last year.  However, looking at the month to month data, pending sales were up 49.40% from December 2008.  At The Burns Real EState Group we have seen an increase in activity in many of the markets we specialize in – luxury homes, Uconn area homes and lakefront properties.  The first time homebuyers we have been helping have been finding some great properties and are also at the forefront of the increased level of market activity in recent weeks. This does not mean there has been an increase in prices, the median sales price in the area fell by 7.05% in the same month to month comparison.  Inventory increased by 2.21% over the same time period for last year and  the average days on the market remained at 77 days.

Housing Stimulus Bill

The latest news out of Washington is that the proposed stimulus bill will include an $8000 tax credit – unlike the proposal from Senator Lieberman, the tax credit will not apply to everyone buying a primary residence and will apply to first time home buyers.  The buyer will not be required to pay back the tax credit when they sell their home. 

The latest statistics from The Greater Hartford Associaton of Realtors has also been released for 2008 and the average sale price in the Greater Hartford area declined 5.27%.  This is in stark contrast with some areas of the country which have been hit by double digit price decreases.  The number of sales in this region decreased by 19.30%  and the sold properties closed, on average, within 4.5% of the listed price. 

In our experience The Burns Real Estate Group, we have been seeing a lot of confusion about current pricing and what to expect as either a buyer or seller in the current market.  In our next blog we will report on the January 2009 sales and pending sales in the Greater Hartford area.

2009 CT Housing Forecast

The National Association of Realtors reports that contract signings for home purchases rebounded in December after a sharp decline in November.  The 6.3 percent increase is higher by 2 percent than a year ago and homes going under contract is a leading indicator for the next month or two of homes sales,  January still is hard to predict as the rate of homes going under contract in November were weak.

Improving areas, in terms of homes closed and pending sales, are markets in California and Florida.  This does not necessarily mean an increase in sales price, San Diego is seeing an increase of pending sales by almost double as compared to the year before.  In the Northeast, Providence has been gaining in closed sales and pending sales in the past several months.

The National Association of Realtors chief economist, Lawrence Yun, forecasts “soft existing home sales in the first quarter of 2009 before steadily trending up later in the year. By the fourth quarter, existing home sales could be easily 10 percent higher than a comparable period the year before.”  Many new home builders are still experiencing extreme financial pain in the current climate, but the housing market is said to be moving in the right direction as a result of less new home construction.

According to the chief economist, the economy cannot recover without the recovery of the housing market .

We are watching the stimulus package carefully as there has been much discussion of a strong housing market recovery package to be included in the bill – the $15,000 tax credit would certainly have an enormous impact on the housing market as buyers will get back into the market to take advantage of the current market prices, low interest rates and the tax deduction.

The Burns Real Estate Group is watching the current economic indicators carefully and in our next BurnsBuzz commentary we will review the  housing statistics for the Greater Hartford and Uconn Area for 2008.  Regional market condition information is critical to help both buyers and sellers make wise decisions in this market and we will share the most up to date housing market information available.

Connecticut Waterfront Update

We wanted to let everyone know about a couple of great Connecticut waterfront properties. The first property on Deepwood Drive in Lebanon makes an ideal year-round residence.

The second lakefront property is a sneak peek of property on Coventry Lake. This exceptional estate on 16 acres features a year-round main house, seasonal guest cottage and over 500 feet of lakefront! The main house offers generously sized rooms, 4 fireplaces, chef’s delight kitchen, first-floor master suite, & a wrap around porch. The property will be coming on the market for $1,250,000.

Give us a call at 860-429-2853 with any questions or when you’re ready to schedule an appointment to view these great Connecticut waterfront properties!

How Purchase Loans Are Made

A Step-By-Step Walkthrough

  1. Pre-approval – Get pre-approved for a mortgage and know in advance exactly how much house you can afford. Completing this step will also increase your negotiating power since you’ll be viewed as a “cash buyer”.
  2. Loan Search – Put yourself in the hands of an experienced mortgage professional, someone who will help you to determine which financing options best suit your needs today and in the future.
  3. Loan Application – It’s crucial to supply the lender with as much information as possible, as accurately as possible. All outstanding debts as well as assets and income should be included.
  4. Documentation – Paperwork supporting the application must also be submitted. Information commonly sought includes pay stubs, two years’ tax returns, and account statements verifying the source of the down payment, funds to close and reserves.
  5. The Hunt – Begin shopping for a house. Once you find the right one, the terms of the sale will be negotiated, including the price and potentially the terms of the loan being sought.
  6. Appraisal – Lenders require an appraisal on all home sales. By knowing the true value of the home, the borrower is protected from overpaying.
  7. Title Search – This is the time when any liens against the property are discovered. A lien may have been placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed.
  8. Termite Inspection – While most purchase loans do not require a formal inspection for termite and water damage, some loans (especially government loans) allow for the possibility. If problems are found, repairs may be necessary.
  9. Processor’s Review – All pertinent information will be packaged by your mortgage professional and sent to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit.
  10. Underwriter’s Review – Based on the information put together by the loan professional, the underwriter makes the final decision regarding whether a loan is approved.
  11. Mortgage Insurance – Many lenders require private mortgage insurance when borrowers put down less than 20 percent on a loan.
  12. Approval, Denial or Counter Offer – In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price.
  13. Insurance – Lenders require fire and hazard insurance on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. In California, some lenders require earthquake insurance on condominiums.
  14. Signing – During this step, final loan and escrow documents are signed.
  15. Funding – At this point, the lender will send a wire or check for the amount of the loan to the title company.
  16. Confirmation of Funding – The lender authorizes the disbursement of loan proceeds.
  17. Closing – Documents transferring title will now be officially recorded by the County Recorder.
  18. Congratulations, you are now a homeowner!
  19. If you’d like to learn more, please give me a call. I’d be happy to speak with you!