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Tax Reform

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Tax Reform Heads to the President

Lawmakers in the House and Senate passed tax reform legislation today, paving the way for the bill to go to President Donald Trump for his signature. The President has said he intends to sign the bill by Christmas.

NAR worked with members of the House-Senate conference committee to help educate them on how to improve the final bill. After the vote, President Elizabeth Mendenhall issued the following statement:

“The results are mixed. We saved the exclusion for capital gains on the sale of a home and protected the mortgage interest deduction for second homes. Many agents and brokers who earn income from personal services will also see some significant new benefits in their business.

Despite these successes, we still have some hard work ahead of us. Significant legislative initiatives often require fixes to address unintended consequences, and this bill is no exception. The new tax regime will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors.

That should concern any middle-class family looking to claim their piece of the American Dream.”

Although the final tax reform bill is far from perfect, it is significantly better for homeowners than previous versions. That’s thanks to the efforts you made. REALTORS® generated over 300,000 emails and telephone calls to members of Congress over two Calls for Action and held countless in-person meetings with legislators, all of which helped shape the final product.

Last-minute changes to the bill include the following improvements:

Capital gains exclusion. In a huge win for current and prospective homeowners, current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.

Mortgage interest deduction. The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit. The House bill sought a reduction to $500,000.

State and local tax deductions. Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to eliminate the state and local income tax deduction altogether.

Pass-through entities. The bill significantly reduces the effective rate of tax on business income earned by independent contractors and income received from pass-through entities. This change will lower the taxes of many real estate professionals.

Next steps

Enactment of the bill does not end NAR’s effort to reduce the negative impact on homeowners. “REALTORS®’ work on tax issues will continue,” says Mendenhall, “and we look forward to joining members of Congress from both sides of the rotunda on that endeavor.”

Access details of the bill.

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Income Tax Deductions

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Tax Reform

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Last week, Congress introduced a “tax reform” bill in the House of Representatives. C.A.R. strongly OPPOSES this bill because it would harm homeownership in California. California is already becoming a renter state and this bill will further depress the homeownership rate.

Among the many ways this so-called “tax reform” bill will hurt real estate:

  • Cuts the mortgage interest deduction cap in half from $1 million to $500,000.
  • Homeowners would no longer be able to deduct the interest on home equity loans.
  • Eliminates state and local income tax deductions.
  • Caps property tax deductions at $10,000.
  • Requires five years instead of two for exclusion of capital gains tax on the sale of a primary home and is phased out at higher income levels.
  • Eliminates the mortgage interest deduction on second homes.

Source: California Assocation of Realtors

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Real Estate Questions? We can help.

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IMMIGRANTS KEY TO HOMEOWNERSHIP GROWTH

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IMMIGRANTS KEY TO HOMEOWNERSHIP GROWTH
Source: Urban Land Institute

The housing and neighborhood location choices of immigrants will have a significant impact on urban growth in the U.S. for decades to come, particularly as more foreign-born residents seek to own homes in suburban communities, according to new research from the Urban Land Institute’s Terwilliger Center for Housing. Homebuilders and developers who can deliver the housing options immigrants want and need stand to benefit in the years to come.

Immigrants in general have strong aspirations for single-family homeownership. They’re also increasingly targeting the suburbs in search of greater employment opportunities and lower-cost housing, the study notes.

Making sense of the story

  • Nationally, the homeownership gap between all households and black and Latino households has changed little since 1970.
  • Without growth of the foreign-population, regions with strong housing markets such as San Francisco would not have recovered as quickly following the recession; and markets that continue to struggle in the recession’s aftermath such as Buffalo would have experienced even weaker growth.
  • Immigrants have strong aspirations for single-family homeownership, and homeownership rates for immigrants rise with their length of time in the U.S. This suggests that immigrants will be a key driver for owner-occupied housing for years to come.
  • Immigrants seeking to own homes as well as those renting homes are increasingly drawn to the suburbs in search of employment opportunities, lower-cost housing and a higher quality of life. Suburbs are home to high-income, high-skilled immigrants as well as lower-income, lesser-skilled immigrants.
  • While immigrants represent a key source of demand for new housing, a substantial share of immigrant housing demand will be met through purchases of existing homes. Sellers of these homes – many of whom will be baby boomers seeking to downsize – will create a strong market for smaller units.

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Home Tax Deductions

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Visit houselogic.com for more articles like this.

Copyright 2017 NATIONAL ASSOCIATION OF REALTORS®

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Water Conserving Plumbing Fixtures

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California law requires property owners (for properties built before 1994) to install water-conserving plumbing fixtures by 2017 for single-family properties and by 2019 for other properties ). Additionally, if a property is altered or improved after 2014, then water-conserving plumbing fixtures must be installed as a condition of final permit approval. (Cal. Civ. Code section 1101.4)

Beginning in 2017 a seller of a single-family property will also be required to disclose whether the property is in compliance with the law. This same disclosure requirement will apply to other types of properties beginning in 2019. Even then, the law creates no point of sale requirement. (Cal. Civ. Code section 1101.4 and 1101.5.)

 

Q 1. What is the purpose of the water conserving plumbing fixtures law (“WCP fixtures law”)?

A The legislature thinks that water conservation is a cost effective approach to the challenges created by not having enough water. Those challenges include future economic health; environmental health; growing urban areas; water reliability; waste water treatment; energy and other resource costs; and protecting and restoring aquatic resources. All of these issues were cited as reasons behind this effort to promote water conservation.

Q 2. Does the water conservation law create any point of sale requirements?

A No. There is nothing in the law that requires the installation of water-conserving fixtures as a condition of sale.

Q 3. What is the significance of it NOT creating a point of sale requirement?

A Because the WCP fixtures law does not create a point-of-sale requirement, there is no obligation on either agents or brokers to ensure that sellers or buyers install WCP fixtures. However, as in all transactions, agents should impress upon the seller the necessity of carefully and accurately completing the appropriate disclosure forms.

Q 4. If there are no point of sale requirements, then what is required?

A The law will require owners of real property to install water-conserving fixtures simply because they own the property regardless of whether they are selling it. The requirement for installation is not immediate, but will take effect in later years depending on the type of property or whether improvements are made. For single family properties built before 1994, the installation requirement takes effect on January 1, 2017. For multi-unit residential property and any commercial property, these requirements will apply starting January 1, 2019. See questions 25 and 26 below.

Q 5. I’m a homeowner selling my pre-1994 single-family house. Are there any installation requirements under this law?

A There is nothing in this law that requires installation of WCP fixtures as a condition of sale. However, if you haven’t already installed water conserving plumbing fixtures on your pre-1994 single-family house, then beginning January 1, 2017, as an owner of the home, you will be in violation of the basic requirement of the law to have water conserving plumbing fixtures installed.

Q 6. Under the law WCP fixtures are not required as a point of sale. However, isn’t it possible that lenders may require it as a condition of the loan?

A Yes. It’s possible. Lenders may make their own underwriting decisions regardless of what the law technically does or does not require. If a lender requires the installation of WCP fixtures as a condition of the loan, that is his or her right to do so. At this time, however, we are unaware of any lender requiring it.

Q 7. What does the law require a seller to disclose regarding water conservation plumbing fixtures?

A Presently, the law only requires the seller to check the box on the TDS as to whether there are water conserving plumbing fixtures. Commencing January 1, 2017, for single family pre-1994 houses, the law will require a seller to disclose to the buyer the requirement of water conserving plumbing fixtures and whether the real property has any noncompliant fixtures. This same requirement will come into effect for multi-unit residential and commercial property starting January 1, 2019. See questions 25and 26 below.

Q 8. What is the definition of “water-conserving plumbing fixture”?

A Water-conserving plumbing fixture means any fixture that is in compliance with current building standards applicable to a newly constructed real property. (Cal. Civ. Code section 1101.3.)

Q 9. What is the definition of “noncompliant fixture”?

A The law calls for installation of water-conserving plumbing fixtures only when the existing plumbing fixtures are “non-compliant.” Noncompliant plumbing fixture means (1) any toilet manufactured to use more than 1.6 gallons of water per flush (2) any urinal manufactured to use more than one gallon of water per flush (3) any showerhead manufactured to have a flow capacity of more than 2.5 gallons of water per minute (4) any interior faucet that emits more than 2.2 gallons of water per minute. (Cal. Civ. Code section 1101.3.)

Q 10. Does the water conservation law apply to all types of property?

A No. The law only applies to property built and available for use on or before January 1, 1994. (Cal. Civ. Code section 1101.2.)

Q 11. Why does it only apply to buildings built before January 1, 1994?

A Under federal law, all residential toilets manufactured after January 1, 1994 must use no more than 1.6 gallons per flush. In California ultra-low flush toilets have been required in all new construction since January 1, 1992.

Q 12. When must the water-conserving fixtures be installed?

A It depends on what kind of property you own, and whether you make improvements. The law sets up three categories: “single-family residential real property,” “commercial real property,” and “multifamily residential property.”

Q 13. If I own a single-family residential property, what are the requirements and when do they take effect?

A Beginning January 1, 2017 all single family property owners will be required to replace noncompliant plumbing fixtures with water-conserving fixtures regardless of whether any improvements are made and whether or not the property is being sold.

Beginning January 1, 2017 a seller must disclose in writing to the buyer the requirement of water-conserving fixtures and whether the real property has any noncompliant fixtures.

However, if you do any improvement requiring a permit after January 1, 2014 on a single-family property, the permit will not be issued unless all noncompliant plumbing fixtures have been replaced with water-conserving fixtures. (Cal. Civ. Code section 1101.4.)

Q 14. I own a multifamily residential property or a commercial property, what are the requirements and when do they take effect?

A Beginning January 1, 2019 all noncompliant plumbing fixtures in any multifamily residential real property and any commercial real property shall be replaced with water-conserving plumbing fixtures.

Beginning January 1, 2019 a seller of these types of properties must disclose in writing to the buyer the requirement of water-conserving fixtures and whether the real property has any noncompliant fixtures.

However, after January 1, 2014, if you do any improvement which either costs at least $150,000 or increases total floor area by more than 10, then all nonconforming fixtures must be replaced with water-conserving plumbing fixtures. And replacement of nonconforming fixtures will be a condition of permit approval or certificate of final completion. However, if you only do improvements requiring a permit in a room then you only have to replace nonconforming fixtures in that room. (Cal. Civ. Code section 1101.5.)

Q 15. Are there any exemptions?

A Yes. There are exemptions for historical sites; property where it isn’t technically feasible to install water-conserving fixtures; buildings where the water is permanently disconnected; buildings slated to be demolished; and a special exemption for a city (or county) itself that has an existing retrofit law. (Cal. Civ. Code section 1101.7.)

Q 16. Can I comply with this law by just putting a brick in my toilet?

A No. The law defines as nonconforming any toilet manufactured to use more than 1.6 gallons. Therefore, displacing water in the tank will not put you in compliance with the law, even though you might be saving just as much water.

Q 17. I own a property in city where there is an existing retrofit law for water-conserving fixtures as a point of sale requirement (such as Los Angeles, San Diego or San Francisco). Are those retrofit laws still in force?

A Yes. Local laws passed before July of 2009 requiring retrofit of plumbing fixtures remain in effect. The state law also allows a locality to pass more restrictive requirements at any time.

Q 18. Can a city or county require greater water savings than the state law? Or have local laws now been superseded by the state law?

A No. A city, county or a retail water supplier has the authority to enact local ordinances or establish policies that will result in a greater amount of water savings than those provided under California’s statewide law on water-conserving plumbing fixtures (Cal. Civ. Code section 1101.8).

 

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Homes Sale Expected to Edge up in 2017

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CALIFORNIA HOME SALES EXPECTED TO EDGE UP SLIGHTLY IN 2017
Source: C.A.R.

img_0856Following a dip in home sales in 2016, California’s housing market will post a nominal increase in 2017, as supply shortages and affordability constraints hamper market activity, according to the “2017 California Housing Market Forecast,” released last week by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

Making sense of the story:

  • The C.A.R. forecast sees a modest increase in existing home sales of 1.4 percent next year to reach 413,000 units, up slightly from the projected 2016 sales figure of 407,300 homes sold. Sales in 2016 also will be virtually flat at 407,300 existing, single-family home sales, compared with the 408,800 pace of homes sold in 2015.
  • “Next year, California’s housing market will be driven by tight housing supplies and the lowest housing affordability in six years,” said C.A.R. President Pat “Ziggy” Zicarelli. “The market will experience regional differences, with more affordable areas, such as the Inland Empire and Central Valley, outperforming the urban coastal centers, where high home prices and a limited availability of homes on the market will hamper sales. As a result, the Southern California and Central Valley regions will see moderate sales increases, while the San Francisco Bay Area will experience a decline as home buyers migrate to peripheral cities with more affordable options.”
  • The California median home price is forecast to increase 4.3 percent to $525,600 in 2017, following a projected 6.2 percent increase in 2016 to $503,900, representing the slowest rate of price appreciation in six years.
  • “With the California economy continuing to outperform the nation, the demand for housing will remain robust even with supply and affordability constraints still very much in evidence. The net result will be California’s housing market posting a modest increase in 2017,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “The underlying fundamentals continue to support overall home sales growth, but headwinds, such as global economic uncertainty and deteriorating housing affordability, will temper stronger sales activity.”

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Housing Market Less Affordable

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NEARLY A QUARTER OF U.S. COUNTY HOUSING MARKETS LESS AFFORDABLE THAN THEIR HISTORIC NORMS
ATTOM Data Solutions, the new parent company of RealtyTrac, released its Q3 2016 Home Affordability Index, which shows that 24 percent of U.S. county housing markets were less affordable than their historic affordability averages in the third quarter. This is up from 22 percent of markets in the previous quarter and up from 19 percent of markets a year ago to the highest share of since Q3 2009 — when 47 percent of markets were less affordable than their historic affordability averages.

The report analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 414 U.S. counties with a combined population of more than 203 million. The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment — including property taxes and insurance.

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Since 1970 Rinetti & Co. Realtors has been selling residential and commercial real estate throughout the greater East Bay. We are boutique real estate company with a single focus, exceptional customer service from start to finish. Rinetti & Co. Realtors has the experience and practical knowledge to adapt to changing market conditions while providing our clients expert advise when buying or selling a home. If you’re considering making a move please contact us and see the difference Rinetti & Co. Realtors can make for you.

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