Friday, December 7, 2012

Fiscal Cliff Crisis or Financial Stability for 2013?


What will the effects of this so-called Fiscal Cliff bring to real estate in 2013?  We've all heard of the potential economic disaster if Congress fails to keep the Bush-era tax cuts in effect. Everyone's taxes will go up by thousands of dollars. But this is just the tip of the iceberg for the real estate industry.

In addition to overall taxes increasing after January 1st, the Mortgage Forgiveness Debt Relief Act may also be allowed to expire at the end of the year. If this happens we can potentially see a drop in home sales by as much as 20% in 2013. How can this be possible?  If homeowners currently underwater choose to short sell their home, they will be required to report their debt cancellation as income to the IRS. This can have a devastating effect on short sales as fewer people will want to take this route and may instead be forced into foreclosure.

In addition, if Congress and the Federal Administration force us off this fiscal cliff, we may also experience a reduction in mortgage interest deductions. The mortgage interest deduction has been a mainstay for decades and has helped spur first-time home purchases.

If the Bush tax cuts are allowed to expire, NBC News states, the current capital-gains tax of 15 percent will rise to 20 percent. Alan Kufeld, a principal with accounting firm Rothstein Kass and an advisor to wealthy families, explains that families who sell a second home that they’ve owned for more than a year pay capital-gains taxes on the difference between the sale price and their original purchase price (minus certain fees, improvements and other deductions).

An example, states NBC News, is a $38 million home purchased for $8 million with $2 million in improvements could show a gain of about $28 million. The current federal tax bill on that gain would be around $4 million. If taxes go up next year, the tax would be $5.5 million – a difference of $1.5 million.

Currently, there's a cap on mortgage deductions for loans up to $1,000,000. Anything higher is capped on your itemized 1040 return. A number currently being discussed in Washington is $500,000. Since the average price of a home in the U.S. is only $170,000, lowering the cap to $500,000, according to the Greenwich Citizen, would be easy for Congress to get passed, since in most of the country it would only affect the rich.

In an extreme case, the mortgage insurance deduction may also be eliminated. These tax deduction losses would likely result in more people continuing to rent, slowing down home purchases.

As for commercial real estate, according to the San Francisco Chronicle the Fiscal Cliff could result in a huge drop in office space demand, resulting in as much as a 20 basis-point increase in vacancy rates with rents only moving sideways at best.

However, not all is doom and gloom. Most believe that our lawmakers will not allow us to dive off the fiscal cliff and will in fact come to some compromise by the end of the year. If this does in fact occur, the real estate industry will continue to strengthen with home values and home sales increasing throughout 2013. Commercially, if we are able to avoid the cliff, we could see as many as two million new jobs created in 2013 and potentially a drop in vacancy by as much as 70 basis-points.

Plus, we may find compromises which could limit certain tax increases and mortgage deductions. If this takes place, we may find mortgage interest deductions being kept intact, but limited to less than the current interest of one million dollars. Either way, we are sure to see a greater level of home sales closing prior to the end of year.

Whether we fall off the Fiscal Cliff or Washington gets their act together and comes to an effective compromise, real estate will continue to be bought and sold and life will continue. The devil will always be in the details and every situation is different, whether you’re a homeowner or investor. The key is to know how the law will affect you personally and to plan various alternatives accordingly.

56 comments:

  1. I came to this page by searching Yahoo. I have found it quite interesting. Thank you for providing this. I will have to visit here again!
    we buy houses fast

    ReplyDelete
  2. I am really impressed with your writing abilities and also with the format in your
    weblog. Is this a paid subject matter or did
    you modify it your self? Either way stay up the excellent high quality writing, it is uncommon
    to peer a great blog like this one nowadays.
    .
    Check out my weblog ; hcg diet for men side effects

    ReplyDelete
  3. I need to to thank you for this good read!!
    I certainly loved every bit of it. I've got you saved as a favorite to look at new stuff you post…
    My homepage - itunes

    ReplyDelete
  4. Paris Apartments We also have very nice propositions for you, if you want to buy apartment in Paris. Visit our blog about Paris to follow Paris news, read useful information about Paris, description of the districts of Paris, sightseeings and many interesting things

    ReplyDelete
  5. Howdy! This is my first visit to your blog!
    We are a group of volunteers and starting a new project in a community in the
    same niche. Your blog provided us beneficial information
    to work on. You have done a wonderful job!

    Also visit my blog post; canine cataracts
    Also see my website > pet care

    ReplyDelete
  6. I'm really impressed with your writing skills as well as with the layout on your

    weblog. Is this a paid theme or did you customize it yourself? Either way keep up the excellent

    quality writing, it is rare to see a nice blog like this one these days..
    Here is my homepage ... http://wikis.collingwood.org/faculty/index.php?title=User:ShirleyPatterson88

    ReplyDelete
  7. Hi! Do you know if they make any plugins to assist with


    SEO? I'm trying to get my blog to rank for some targeted keywords but I'm not seeing very good

    success. If you know of any please share.
    Many thanks!
    my webpage: solar powered panel

    ReplyDelete
  8. When I originally commented I clicked the -Notify me
    when new feedback are added-

    checkbox and now every time a remark is added I get four emails with the identical comment.


    Is there any manner you can take away me

    from that service? Thanks!
    My site :: pm.werkengine.com

    ReplyDelete
  9. This design is steller! You most certainly know how to

    keep a reader amused. Between your wit and your videos, I was almost moved to
    start my own blog (well,

    almost...HaHa!) Great job. I really loved what you had to say, and more than

    that, how you presented it. Too cool!
    Also see my site :: www madrid org dat capital

    ReplyDelete
  10. What’s Happening i'm new to this, I stumbled upon this I've found It
    absolutely helpful and it has aided me out loads. I hope
    to contribute & help other users like its helped me. Great job.
    Here is my web-site ; www.nettyherawati.info

    ReplyDelete
  11. I really wanted to post a small remark to

    express gratitude to you for all the marvelous information you are placing on this website.
    My particularly long internet investigation has at the end been recognized with good knowledge to exchange with my colleagues.
    I 'd repeat that we

    visitors are unquestionably endowed to live in a really good

    community with so many brilliant people with helpful

    points. I feel

    very much privileged to

    have seen the webpages and look forward to tons of more thrilling moments reading here. Thanks a lot once again for all the details.
    Review my webpage - latest news immigration uk

    ReplyDelete
  12. I do believe all of the ideas you've

    introduced on your post. They are very convincing and can definitely work. Nonetheless, the posts are too quick for starters. May just you please lengthen them a bit from next time? Thank you for the post.
    Also visit my web page : sky tv guide 2nd april 2012

    ReplyDelete
  13. I don’t even know the way I stopped up here,

    however I assumed this submit was once good. I

    don't realize who you are but

    certainly you are going to a famous blogger in case

    you are not already ;) Cheers!
    Also visit my site hober.com

    ReplyDelete
  14. Thanks a lot for providing individuals with remarkably wonderful chance to discover


    important secrets from here. It's always

    very ideal plus

    stuffed with a lot of fun for me and my office

    peers to search your blog nearly thrice per week to learn the fresh issues you have got. And of course,

    I'm certainly

    fascinated for the awesome things you give. Selected 3
    facts in this article are in reality the most efficient I've had.
    Here is my website - rc cars rc cars

    ReplyDelete
  15. I like what you guys are up too. Such intelligent work and reporting!
    Carry on the

    superb works guys I have incorporated you guys to my blogroll.

    I think it will improve the value

    of my site :)
    Feel free to visit my web-site www.totnespost.Com

    ReplyDelete
  16. I do agree with all of the ideas you've presented in your post. They are very

    convincing and will definitely work. Still, the posts are very short for newbies. Could you please extend them a little from next time? Thanks for the post.
    My web page : Proastrologer.blogspot.Fr

    ReplyDelete
  17. magnificent points altogether, you simply won a new reader.
    What could you suggest about your

    submit that you simply made a few days ago? Any sure?
    Also visit my blog post - pts property

    ReplyDelete
  18. Valuable information. Lucky me I found your website by accident, and I'm shocked why this

    accident did not happened earlier! I bookmarked it.
    My webpage: elte.hu

    ReplyDelete
  19. There is visibly a bunch to identify about this.

    I assume you made some good points in

    features also.
    Here is my blog - http://wiki.eblackcu.net/index.php?title=Why_The_country_of_spain_Is_among_the_most_favored_Golfing_Trip_Destination

    ReplyDelete
  20. I’ve been exploring for a little bit for any high quality articles
    or blog posts in this sort of house . Exploring in Yahoo I

    ultimately stumbled upon this site. Studying this info So i’m

    happy to express that I've an incredibly just right uncanny feeling I discovered exactly what I needed. I most

    no doubt will

    make certain to do not put out of your mind this web

    site and give it a glance on a relentless basis.
    Feel free to visit my homepage real estate snug tasmania

    ReplyDelete
  21. Pretty great post. I simply stumbled upon your weblog and wanted to say

    that I have truly enjoyed browsing your weblog posts. After

    all I’ll be subscribing on your feed and I am hoping

    you write once more very soon!
    Have a look at my webpage : http://www.authenticlinks.com/Finance/laid-back-world-cup-round-1-2/

    ReplyDelete
  22. Definitely, what a magnificent site and revealing posts, I definitely will bookmark
    your

    website.Best Regards!
    My webpage dusit.ac.th

    ReplyDelete
  23. Thanks , I have recently been looking for info about this

    subject for ages and yours is the best I have discovered
    so far. But, what about the

    conclusion? Are you sure about the source?
    Feel free to visit my site ; http://danghienit.blogspot.com/2009/06/cpu-nhan.html?m=1

    ReplyDelete
  24. This comment has been removed by the author.

    ReplyDelete
  25. Woah! I'm really digging the template/theme of this website. It's simple,
    yet effective. A

    lot of times it's tough to get that "perfect balance" between usability and visual appearance. I must say you have done a very good job with this. Also,

    the blog loads super quick for me on Firefox. Outstanding Blog!
    Also see my website: http://wiki.malerfreunde.com/index.php?title=Benutzer:LashandraHill1977

    ReplyDelete
  26. My wife and i felt contented that Peter managed to finish up

    his homework while using the ideas he gained while using the
    blog. It is now and again perplexing just to find yourself making a gift of secrets and techniques
    that most people might have been selling. So we keep in
    mind we now have the writer

    to appreciate for this. The main illustrations

    you have made, the straightforward site

    navigation, the friendships you give support to promote -
    it is all astonishing, and it's aiding our son and the family do think that topic is enjoyable, and that's

    wonderfully

    pressing. Many thanks for all!
    Feel free to surf my web-site ... http://socialfy.lbriones.com

    ReplyDelete
  27. Hello my friend! I wish to say that this post is amazing, nice written and include

    approximately all vital infos. I’d like
    to see more posts like this.
    Here is my site ; joeldmitchell.com

    ReplyDelete
  28. I do trust all the ideas you have

    presented in your post. They are really convincing and


    will definitely work. Still, the posts are too brief for starters.
    Could you please extend them a bit from next time?
    Thanks for the post.
    Take a look at my blog post ... library.mopartrucksandstuff.com

    ReplyDelete
  29. Good - I should definitely pronounce, impressed with
    your site. I had no trouble

    navigating through all the tabs and related info ended
    up being truly simple to do

    to access. I recently found what I hoped for before you know it at all.

    Reasonably unusual. Is

    likely to appreciate it for those who add forums or something, site theme .
    a tones way for

    your client to communicate. Excellent task.
    .
    Also visit my blog : spain iphone 5

    ReplyDelete
  30. Its like you read my mind! You appear to know so much
    about this, like you wrote the book in it or

    something. I think that you can do with some pics to drive the
    message home a bit, but

    instead of that, this is wonderful blog. A great
    read. I will certainly be back.
    Here is my webpage ; lizslovelylife.blogspot.ru

    ReplyDelete
  31. I don’t even know the way I ended up here,

    but I assumed this publish used to be good. I

    don't know who you are but definitely you are going to a well-known blogger should you aren't already ;) Cheers!
    Visit my site :: www.Eufloria-game.com

    ReplyDelete
  32. I think this is among the most important info for me. And i am glad

    reading your article. But should remark on few general
    things, The site style is

    wonderful, the articles is really excellent : D.
    Good job, cheers
    Look into my web-site ; www.catral.biz

    ReplyDelete
  33. This is my first time pay a quick visit at here and i am truly impressed to read all at single place.


    Feel free to surf to my web-site: pole pruner saw

    ReplyDelete
  34. What's up mates, how is the whole thing, and what you wish for to say about this article, in my view its in fact awesome for me.

    Feel free to surf to my page; ab exercises for women

    ReplyDelete
  35. We're a group of volunteers and starting a new scheme in our community. Your site offered us with valuable info to work on. You've
    done an impressive job and our entire community will be thankful to you.


    Here is my web site: heart rate monitor

    ReplyDelete
  36. Hi, Neat post. There is an issue together with your web

    site in internet explorer, may check this… IE still
    is the

    marketplace leader and a huge part of other folks
    will miss your magnificent writing because of this
    problem.
    Feel free to surf my web blog yrc news today

    ReplyDelete
  37. Hey there! Do you know if they make any plugins to safeguard

    against hackers? I'm kinda paranoid about losing everything I've worked hard on.
    Any suggestions?
    My website - confirmation of employment letter

    ReplyDelete
  38. Awesome blog! Do you have any hints for aspiring writers?
    I'm planning to start my own site

    soon but I'm a little lost on everything. Would you advise starting with a
    free platform like

    Wordpress or go for a paid option? There are so many options out
    there that I'm totally

    overwhelmed .. Any recommendations? Cheers!

    Feel free to visit my web page www.adfty.net

    ReplyDelete
  39. Thanks for another magnificent post. Where else could

    anyone get that kind of information in such a
    perfect way of writing? I've a

    presentation next week, and I'm on the look for such information.


    Also visit my web site ... https://translate.lorea.org/profile/GhislaineRodriguez1979

    ReplyDelete
  40. Thanks for another magnificent post. Where else could


    anyone get that kind of information in such a perfect way of writing?
    I've a

    presentation next week, and I'm on the look for such information.


    my blog post: https://translate.lorea.org/profile/GhislaineRodriguez1979

    ReplyDelete
  41. I like what you guys are up also. Such smart work and reporting!

    Carry on the

    superb works guys I have incorporated you guys to
    my blogroll. I think it'll improve the value

    of my web site :)

    Also visit my web blog - gloriouslinks.com

    ReplyDelete
  42. Wow, fantastic blog layout! How long have you been blogging for?


    you make blogging look easy. The overall look of your website is excellent,
    let alone the content!

    Review my blog ... authenticlinks.com

    ReplyDelete
  43. Hey there would you mind letting me know which web host you're using? I've loaded your blog in
    3 different web browsers and I must say this blog loads a lot faster then most.
    Can you recommend a good web hosting provider at a reasonable price?
    Thanks a lot, I appreciate it!

    My site: mazda rx 7 for sale

    ReplyDelete
  44. Post writing is also a fun, if you be familiar with afterward you can write or else it is
    complex to write.

    My web page ... new mazda rx 8

    ReplyDelete
  45. After I initially commented I appear to have clicked on
    the -Notify me when new comments are added- checkbox and now whenever a comment is added I get four
    emails with the exact same comment. There has to be an easy method you can remove me from that service?
    Thank you!

    Also visit my web blog how to increase pitching velocity

    ReplyDelete
  46. Greetings from California! I'm bored to death at

    work so I decided to browse your website on my iphone during lunch break. I

    love the knowledge you provide here and can't wait to take a look when I get home.

    I'm

    amazed at how fast your blog loaded on my mobile .. I'm not even using WIFI,

    just 3G .. Anyhow, fantastic site!

    Review my web-site - www.retardface.com

    ReplyDelete
  47. I’m impressed, I need to say. Actually not often do I encounter a
    blog that’s each educative and entertaining, and
    let me tell you, you've gotten hit the nail on the head. Your

    idea is excellent; the problem is one thing that not

    sufficient people are speaking intelligently about. I'm very

    joyful that I stumbled throughout

    this in my seek for something regarding this.

    Feel free to surf to my web page :: http://excelanto.in/sample/excelantoFB/blog/view/883/apartments-for-sale-in-javea-spain-your-2nd-holiday-house

    ReplyDelete
  48. It's going to be finish of mine day, but before end I am reading this impressive article to improve my experience.

    Here is my website: best diet for weight loss

    ReplyDelete
  49. I am often to blogging and i really respect your content.
    The article has really peaks my interest.
    I'm going to bookmark your web site and maintain checking for brand new information.

    my website ... http://excelanto.in

    ReplyDelete
  50. I just could not go away your website prior to suggesting that

    I really loved the standard info an individual

    supply in your guests? Is gonna be back frequently in order to inspect
    new posts

    Feel free to visit my web page http://zadavator.spbal.ru

    ReplyDelete
  51. I have been checking out a few of your articles and it's pretty nice stuff. I will surely bookmark your website.

    Feel free to visit my web-site :: www.Maxgigs.com

    ReplyDelete
  52. Please let me know if you're looking for a author for your weblog. You

    have some really great articles and I believe I would be a good asset. If you ever want to take

    some of the load off, I'd love to write some articles for your blog in

    exchange for a link back to mine. Please blast me an email if interested.
    Thank

    you!

    Also visit my web page ... http://www.kutno.faceonline.pl/index.php?do=/profile-15925/info/

    ReplyDelete
  53. Canada Insurance policy – Help or Nuisance for your aspiring visitors? The completely new launched Canadian Super Visa provides generated a lot enthusiasm among.Super Visa Insurance Toronto

    ReplyDelete
  54. Write more, thats all I have to say. Literally, it seems
    as though you relied on the video to make your point.
    You definitely know what youre talking about, why waste your intelligence
    on just posting videos to your weblog when you could be giving us something informative to read?


    Take a look at my blog ... übersetzung deutsch italienisch

    ReplyDelete
  55. Canada Insurance policy – Help or Nuisance for your aspiring visitors? The completely new launched Canadian Super Visa provides generated a lot enthusiasm among.Health & Dental Insurance Toronto

    ReplyDelete