Here Comes The Proof

Volume 14 Issue 4 April 2019

A

t the end of the first week

in April, the job

numbers

for March

will be released. With

these numbers we will

see proof of one of two

things. The first proof

could be that the dis-

mal jobs numbers in

February were just an anom-

aly. January's job growth was reported

as very strong and when you take Janu-

ary's numbers together with February,

one can see that the average growth per

month was not far below average.

Therefore, we don't need a huge bounce

back month in March to even things out

-- just an average month.

On the other hand, a weak report for

March could be seen as the start

of a trend of slower jobs

growth and thus slower over-

all economic growth. This

means that this week's jobs

report is more significant

than the others we have wit-

nessed over the past several

years. In the aftermath of the

recession, the United States has

witnessed a record of over 100 months

of positive jobs growth, and the past

few years have been very strong. So, it

would not be surprising to see some-

what of a slowdown in the months

ahead.

In This Issue P2 It’s The Seniors’ Fault || P2 Tax Deductions For Homeowners

P3 Here Comes The Proof || P4 Rents Still Rising

Selected Interest Rates

March 21, 2019 30 Year Mortgages——–4.28%

2018 High (Nov 15 %

2018 Low (Jan 4)———–—3.95%

15 Year Mortgages——-3.71%

5/1 Hybrid ARMs——–—–3.84%

10 Year Treasuries—–—–2.54%

Sources—Fed Reserve, Freddie Mac

Note: Average rates do not include fees and points. Information is provided for indicating trends only and should not be used for comparison purposes.

Continued on Page 3

THIS NEWSLETTER IS BROUGHT TO YOU BY:

Did You Know…

A total of 8.8 million households bought homes in the two years preceding the most recent Ameri-can Housing Survey (AHS). The survey, sponsored by the Depart-ment of Housing and Urban Development, is conducted by the Census Bureau every two years. The 8.8 million homebuy-ers are the highest tallied by any AHS since the Great Reces-sion. There were 11.6 million identified in the 2005 AHS, but the number fell to a low of 6.8 million in 2011. The total is broken into two subsets, the 3.3 million who were first-time buyers and the 5.5 million trade-

up buyers. Source: National Association of Home Builders

Tax Deductions...

Y

ou have heard it before. Owning a home is a great tax deduction. It is one thing

to make a general state-ment. It is another to understand the specifics of how owning a home may lower your tax liability. Below is a list of important points that every homeowner should know. Note that

this is not a complete list of allowa-ble deductions.

Itemizing deductions. In order to deduct your mortgage interest, you must itemize deductions rather than take the standard deduction. As a general example, if your allowable standard deduction is $12,000 and you only have $6,000 in itemized deductions, you will be better off taking the standard deduc-

tion. However, if the home gives you an “extra” $10,000 in item-

ized deductions, you are better off itemizing. Note that the “excess” $6,000 ($12,000 minus $6,000) will not garner any benefit because you are now itemizing.

The housing payment. The housing payment is generally comprised of four segments: Principal, interest, tax-

es and insurance (PITI). Generally,

you can deduct two of these—

mortgage interest and taxes. The good news is in most cases these two items comprise the greatest majority of the total payment. For ex-ample, here are some fictitious numbers giv-en to illustrate this point:

300 Principal 1,000 Interest 400 Taxes

50 Insurance

$1,750 Total Payment (PITI)

Again, using fictitious numbers, if the above homeowner was in a 25% tax bracket, the home payment would ac-tually be reduced by approximately

$350 per month after taxes. There are a few exceptions or requirements with regard to this rule—

∗ The deduction is only allowable for principal residences and sec-

ond homes. Homes which are rented out (investor properties)

have additional tax benefits.

∗ You cannot deduct interest on any loan amount above $750,000.

∗ You can only deduct interest on a mortgage which is taken out

to purchase, build or improve

Page Two

“…get with your

tax advisor for clarification...”

S

eniors who were born

after 1931 are less likely

to sell their homes than

were previous generations

—and it’s a significant cause of the

housing shortage, according to the

“February Insight” report from

Freddie Mac.

The result is around 1.6 million

houses were not for sale through

2018, representing about one

year’s supply of new construction,

or more than 50 percent of the

shortfall of 2.5 million housing

units—that the market faces. The

scarcity factor serves to increase

housing prices and make renting

more attractive to younger genera-

tions.

“We believe the additional demand

for homeownership from seniors

aging in place will increase the

relative price of owning versus

renting,” said Sam Khater, chief

economist at Freddie Mac. “This

further highlights the importance of

addressing barriers to the produc-

tion of new housing supply to help

accommodate long-term housing

demand.” And it’s likely to in-

crease over time as improvements

in health care and technology make

aging in place easier...

Source: DS News

It’s The Seniors’ Fault

Page Three

a property. You may be able to deduct a mortgage insurance pay-ment under certain conditions depending upon the year that you paid them.

Points. A point is a cost charged by a mortgage company for originating a mortgage and/or buying the rate down on that mortgage. Generally, points can be deducted in the year that they are paid when they are used to purchase a primary residence. If the purpose of the mortgage loan is to refinance an existing loan, then the points may still be able to be deducted, but the deduc-tion must be spread out over the life of the loan, unless the refinance was to improve the present home. There are additional restrictions regarding the deducting of points which are not delineated herein.

Investment properties. Those who own properties for the purpose of generating income can deduct the cost of expenses of carrying the property against the income of that property. Allowable expenses would include interest, insur-ance, taxes, maintenance, depreciation

and more. Again, using a fictitious example…

$1,000 Rental Income (monthly)

-800 Interest, taxes and insurance

-50 Maintenance

-100 Depreciation

$50 monthly “net” income or $600

for the year.

Sale of the home. Another major tax benefit is achieved when someone sells their home. The profits of the sale of a principal residence are excluded from income up to a maximum of $500,000 for joint filers, including married couples, and $250,000 for individuals. You must have owned the home at least two years and used it as your primary residence at least two out of the past five years.

The tax benefits of owning a home are “great” as advertised. You are advised to get with your tax advisor for greater clarification with regard to these gen-eral rules. Note that changes to the tax law will affect some of these calcula-tions, including increases in the allowa-ble standard deductions, the lowering of personal tax rates and the maximum deductions for state/local property and income taxes paid...

...For Homeowners

©2019, All rights reserved

The Hershman Group www.originationpro.com

1-800/581-5678

Here Comes The Proof

Continued from Page 1

Keep in mind that it is not just the

jobs growth for March that is

important. In the past several

months, we have seen some pretty

significant revisions to previously

released numbers. Thus, an up-

ward revision in February's num-

bers is also a possibility. The ana-

lysts will also be looking at the

labor participation rate to see how

many of the long-term unem-

ployed or retired are re-entering

the workforce, because the low

unemployment rate tells us that we

need more workers to become

available in order for the labor

force to keep growing. Overall,

this will be a very interesting jobs

report, and the results may give us

a clue as to the direction of the

economy and especially interest

rates...

“…Thus, an upward

revision in February’s numbers is

also a possibility…”

Rents Still Rising

Address Correction Requested

In This Issue:

Here Comes The Proof

S

ingle-family rent prices recorded a 3.1 percent increase in Decem-

ber, according to data from CoreLogic. This is slightly higher than the

2.9 percent increase recorded in December 2017. CoreLogic deter-

mined that national rent growth was primarily fueled by low-end rent-

als throughout 2018.

This market sector, which is defined as properties with rent prices less than 75

percent of the regional median, saw a 3.7 percent annualized increase in Decem-

ber, down slightly from the 3.9 percent increase from one year earlier. High-end

rentals, where the rent prices are greater than 125 percent of a region’s median

rent, were up 2.9 percent in December 2018. One year earlier, the annualized

increase was 2.5 percent.

“Single-family rents increased an average of 3.0 percent in 2018, exceeding the

2.7 percent average pace experienced in 2017,” said Molly Boesel, Principal

Economist at CoreLogic. “The strengthening in rent prices reflects strong eco-

nomic and labor markets. However, low-end rental increases outpaced high-end

increases for the fifth consecutive year, suggesting continued supply constraints

on the lower end.”... Source: CoreLogic