HotelDel DownTown Sunset

Greetings from Jennifer Ross -  Realtor
Cafe ChloeMy Dad visited last week and we enjoyed dinner in the East Village of downtown at "Café Chloe" on the corner of 9th and G street. The atmosphere is chic/casual and the modern French cuisine fantastic!  I had fresh halibut while my Dad enjoyed pork chops.  The staff was friendly and suggested the perfect red wine with our meal.  We had some kind of a hot bread pudding dessert that was truly nummy!  A very fun place to sit and people watch. I'm going back to try their brunch!
News and Views - It's Not All Doom and Gloom  
The Mortgage Bankers Association that applications for loans rose by 13 percent in the past week. In particular, applications for refinance loans were up by 17 percent as homeowners took advantage of low mortgage rates to refinance. Of course, for a homeowner to refinance their loans it would require they have a certain amount of equity in the home. The fact that not all homeowners are upside down on their loans seems to come as a surprise to a lot of people. They might also be surprised by the research from the MBA that shows nearly 40 percent of all homeowners live in a house that is absolutely mortgage free.
According to the FBHAI, the median price of an entry-level home in San Diego County was $333,730, 20 percent higher than the state's $266,750.
The median price of a home in the San Diego-Carlsbad-San Marcos was $321,000.
Assuming a 10 percent down payment and an adjustable effective interest rate of 4.09 percent, CAR estimates that the minimum household income required to purchase an entry-level home in San Diego County is $55,000. The monthly payment including taxes and insurance for such a borrower would be $1,830.
A housing shortage once the market fully recovers is one of the biggest concerns facing San Diego real estate, according to an economic forecast delivered to local agents by the chief economist at the National Association of Realtors (NAR) on Friday.
Reiterating many issues familiar to anyone in the local market, Lawrence Yun -- speaking at the San Diego Association of Realtors' Real Estate Summit -- said the shortage of housing created by the historic lows in new home construction pose a potential crisis two to three years from now.
This scarcity of supply would result in quickly escalating home prices that would be good for current homeowners, but bad for the industry.
"There would be more people priced out of the market and far fewer transactions," he said. "Home building needs to reflect population growth."
Mortgage rates went up this week, stopping a four-week streak of record-low rates for the 30-year fixed.
The benchmark 30-year, fixed-rate mortgage rose 6 basis points this week, to 4.63 percent, according to the national survey of large lenders.
After tying a modern record low four weeks ago at 4.74 percent, the 30-year fixed fell the next three weeks, bottoming out at 4.57 percent. Rates had last reached those depths a couple of generations ago, in the mid-1950s.
The benchmark 15-year, fixed-rate mortgage rose 5 basis points, to 4.11 percent.
Fact or Fiction?  The Health-Care Law and Real Estate Tax
Rumors are flying that the health-care legislation Congress passed this year will impose a sales tax on all real estate sales. But the rumors are based only partly on fact. Although there is a new tax, it will not apply to everyone, and existing tax breaks for home sales will remain in place.
The Health Care and Education Reconciliation Act of 2010, which President Obama signed into law March 30, is comprehensive and complex. Section 1402, "Unearned Income Medicare Contribution," imposes a 3.8 percent tax on profits from the sale of real estate -- residential or investment.
But the levy is aimed at high-income taxpayers, leaving most people untouched. And it will not take effect until Jan. 1, 2013.
Let's look at the facts of this new law.
First, it is not a sales tax, nor does it impose any transfer or recordation tax. It is called a Medicare tax because the money received will be allocated to the Medicare Trust Fund, which is part of the Social Security system.
Next, if your adjusted gross income is less than $200,000, you are home free. The income thresholds are clearly spelled out in the law. If you are married and file a joint tax return with your spouse, the law will apply only if your income is more than $250,000. (If you and your spouse opt to file a separate tax return, the threshold is reduced to $125,000 each.) For all other taxpayers, you have to make more than $200,000 to be covered under the new law.
The up-to-$500,000 tax-free exclusion of gain for married couples filing a joint tax return (or up-to-$250,000 for single taxpayers) has not been repealed, and the right to deduct mortgage interest and real estate tax payments has not been eliminated.
How is the tax calculated? Through a complex formula that could be called "the accountants' protection act." As a taxpayer, you (or your financial adviser) must determine which is less: the gain you have made on the sale of your house, or the amount by which your income exceeds the appropriate threshold.
Complicated? Yes. Let's look at these examples. Your adjusted gross income is $150,000. You sell your house and make a profit of $400,000. There is no change in the way you determine your gain: You take your purchase price, add the cost of any major improvements you have made over the years and subtract that number from the net sales price. This assumes you and your spouse have owned and lived in the property for at least two out of the five years before it was sold. Accordingly, you are eligible to exclude all of your profit; you will not be subject to the new 3.8 percent Medicare tax.
Now let's change the example so your adjusted gross income is $300,000. Since you are eligible to take the profit exclusion of up to $500,000, once again you do not have to pay the Medicare tax. Your entire capital gain is excluded, so there is no profit subject to the Medicare tax.
But let's assume you strike it rich and have made a profit of $600,000 on that home sale. Your income is $300,000. You can exclude only $500,000 under current law, so you will have to pay capital gains tax on the remaining $100,000. The applicable capital gains tax rate is 15 percent, so you will owe Uncle Sam $15,000.
And since your income is over the Medicare tax threshold, you now have to pay the 3.8 percent tax. But on what amount?
As indicated earlier, the tax is based on the lesser of your profit or the difference between the threshold and your income. In this example, your taxable profit is $100,000. The difference between your $300,000 income and the $250,000 threshold is $50,000. You pay the 3.8 percent tax on the lower number, $50,000, so you will owe the IRS an additional $1,900.
The new law has not been widely analyzed or interpreted, and it won't go into effect for about 2 1/2 years. However, since the law applies to all forms of real estate, including vacation homes, you should consider consulting with your tax and financial advisers regarding your exposure.
In the meantime, don't believe the rumors.
Famous Quotes
History has demonstrated that the most notable winners usually encountered heartbreaking obstacles before they triumphed. They won because they refused to become discouraged by their defeats.
Bertie Charles Forbes
Video of the Week
Fishing DogFishing Labrador Retriever
Bodie, a talented Labrador Retriever, catches a large salmon.  "I thought labs were supposed to be hunters, not fisherman." The fish was "bigger than anything his dad could catch.".
As always, feel free to give me a call 800-913-7677 with your real estate needs.  I appreciate your referrals.

Acedemic Earth 

Jennifer Ross

Experience Counts!
Over 21 years in
Real Estate sales
Serving all of San Diego
Office: 800.913.7677
Direct: 619.985.7340

Current Mortage Rates

 ( weekly avg)
 30 yr fixed: 4.63%
15 yr fixed: 4.11%

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