Jupiter Florida Real Estate Broker

Florida Supreme Court issues HOA ruling

A Florida Supreme Court ruling applies to developers of home communities. The core issue focused on the responsibility a developer has down the road if problems arise in “essential services,” such as roads or sewer systems.

The Lakeview Homeowners Association in Central Florida alleged construction defects in the development’s subdivision against Maronda Homes after the homeowners association (HOA) assumed control. It alleged a “breach of the implied warranties of fitness and merchantability in the residential construction context.” The specific complaint: bad stormwater drainage that flooded driveways along with other problems.

The HOA filed a lawsuit claiming the problems were latent and could not easily be discovered by homebuyers.

Maronda argued that “common law implied warranties of fitness and merchantability” don’t include a community’s infrastructure – items beyond the home itself. If so, the builder said, it wasn’t responsible for things like retention ponds, private roads, underground pipes, etc.

A trial court agreed with Maronda; an appeal court did not. That took the case to the Florida Supreme Court.

The key issue before the Supreme Court was whether it should extend buyer protections beyond a home itself via an implied warranty. In the end, the Florida Supreme Court upheld the appeal court decision that Maronda did have some responsibility for community infrastructure.

For homebuyers, this means an “implied warranty of fitness and merchantability” now extends beyond their new home in some cases to the surrounding roads, sewer systems, and other infrastructure built by the community developer.

Mortgage buyer Freddie Mac said Thursday the average rate on the 30-year loan jumped to 4.46 percent from 4.29 percent last week. The average on the 15-year fixed loan increased to 3.47 percent from 3.30 percent.

Rates have risen a full percentage point since May after the Federal Reserve signaled it might slow its bond purchases by year’s end. Rates peaked at 4.6 percent in August.

Mortgage rates have stabilized since September, when the Fed surprised markets by taking no action. And rates remain low by historical standards. The Fed meets later this month and could slow the bond purchases if the economy shows further improvement.

The bond purchases are designed to keep long-term rates low.

The increase in mortgage rates has contributed to a slowdown in home sales over the past two months. But the government reported Wednesday that purchases of new homes ramped up in October after three months of soft sales, evidence that the housing market is improving fitfully.

Sales of new homes increased 25.4 percent to a seasonally adjusted annual rate of 444,000 in October, the largest monthly percentage increase since May 1980.

And in another sign of potential economic strength, the Commerce Department said Thursday the economy grew at a 3.6 percent annual rate from July through September, the fastest since early 2012. But nearly half the growth came from a buildup in business stockpiles, a trend that could reverse in the current quarter and hold back growth.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage fell to 0.5 point from 0.7 point. The fee for a 15-year loan dropped to 0.4 point from 0.7 point.

The average rate on a one-year adjustable-rate mortgage ticked down to 2.59 percent from 2.60 percent last week. The fee was unchanged at 0.4 point.

The average rate on a five-year adjustable mortgage jumped to 2.99 percent from 2.94 percent last week. The fee declined to 0.4 point from 0.5 point.

Several federal tax breaks important to the real estate industry expire at the end of the year, and it remains to be seen when or if Congress will extend them.

These include the:

• PMI – a tax deduction for premiums for mortgage insurance provided by the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), the Rural Housing Service and private mortgage insurance

• Short sale principal forgiveness – the exclusion from taxable income of up to $2 million of debt a lender forgives on a principal residence sold through a short sale, mortgage restructuring or foreclosure

• Residential energy improvements – the maximum lifetime tax credit of $500 for energy efficiency improvements in a principal residence

• Accelerated property deductions – The Section 179 expensing deduction, which allows small business owners to deduct business property costs in a single year rather than over several years

• Bonus depreciation rules – a tax benefit that allows businesses to deduct 50 percent of the cost of qualifying business property in a single year

• Energy-efficient commercial buildings deduction

• New home energy improvements – a $1,000 or $2,000 credit for constructing or manufacturing qualified energy-efficient homes also are slated to expire this year.

If forgiven debt is taxed this will severely slow down short sales.  Let’s say you owe your lender 500k on your primary residence house.  You do a short sale and after all is said and done you give them 400k.  There is a 100k deficiency that you still owe them.  Typically what happens is they declare this to be non recoverable which allows it to be taken a deduction on their taxes.  In order to do this they must send you a 1099 for 100k.  Up until the end of this year the tax man forgave the tax due on this income to you under certain circumstances.  Well, It looks like that will change and the 100k of forgiven debt would be taxed as regular income.

According to the 2013 NAR Survey of Home Buyers and Sellers:

‘When buyers were asked where they first learned about the home they purchased, 43 percent said the Internet; 33 percent from a real estate agent; 9 percent a yard sign or open house; 6 percent from a friend, neighbor or relative; 5 percent from home builders; 2 percent directly from the seller; 1 percent a print or newspaper ad; and less than 1 percent from other sources.’

This is the big question posed as for Buyers, Sellers and us as Realtors it affects where we allocate our advertising resources.

Note that by placing the property in the MLS for Realtors (33%) which is then used to populate the vast majority of internet sites (43%) though the internet data exchange (IDX) systems and placing a sing in the yard (9%) we have 85% market coverage.

By: Chris Ryder

When the economy picks up the feds wills top QE2 and this will add at least a point to mortgages…

Average U.S. rates on fixed mortgages declined this week after two weeks of increases

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan fell to 4.22 percent from to 4.35 percent last week. The average on the 15-year fixed mortgage dipped to 3.27 percent from 3.35 percent.

Rates had spiked over the summer and reached a two-year high in July on speculation that the Federal Reserve would slow its bond purchases later this year. But the Fed held off in September and now appears poised to wait at least a few more months to see how the economy performs. The bond purchases are intended to keep long-term interest rates low.

Mortgage rates tend to follow the yield on the 10-year Treasury note. They have stabilized since September and remain low by historical standards.

Still, mortgage rates are nearly a full percentage point higher than in the spring. The uptick has contributed to a slowdown in home sales. The National Association of Realtors said sales of existing homes fell 3.2 percent in October, the second straight monthly decline.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan also was steady at 0.7 point.

The average rate on a one-year adjustable-rate mortgage held at 2.61 percent. The fee was unchanged at 0.4 point.

Despite the recent slowdown in the housing recovery, Federal Reserve policymakers last month said they still expected to dial down their easy-money policy within a few months, according to meeting minutes released Wednesday.

Fed officials also debated whether to pull back the bond-buying program even before the job market shows clear improvement if concerns about its costs and risks increase.

Policymakers said they could “slow the pace of purchases at one of its next few meetings,” depending on the economy, according to minutes of the Oct. 29-30 meeting.

The Fed is buying $85 billion a month in Treasury bonds and mortgage-backed securities in an effort to hold down long-term interest rates and stimulate economic and job growth. Financial markets had expected the Fed to begin to taper the purchases in September, but the Fed put off the move amid weaker economic reports and the looming budget showdown in Congress.

The Fed’s decision to maintain the level of bond purchases in October was widely expected, in part because the government shutdown delayed the release of economic reports. Fed policymakers also said “the housing sector slowed somewhat in recent months, and (budget cuts and tax increases were) restraining economic growth,” according to the minutes.

Still, Fed officials “considered scenarios” under which they might taper the purchases “before an unambiguous further improvement” in the job outlook “was apparent.”

For example, the Fed has discussed the risks of eventual high inflation and of bubbles forming in markets, such as junk bonds, as low rates drive investments to riskier assets.

If the Fed’s policymaking committee trimmed the purchases before the outlook substantially improved because of rising costs, it “would need to communicate (that) effectively” the minutes say.

Even more critically, the Fed said “it might well be appropriate to offset the effects of reduced purchases by” taking other steps that could boost growth.

The Fed, for instance, has discussed lowering the threshold unemployment rate for when it would consider raising a key short-term interest rate, changing it from a 6 percent unemployment rate goal to 6.5 percent. That interest rate has been near zero.

Last month, the minutes show, “a couple” of policymakers favored reducing the threshold, but others noted that might raise concerns about the Fed’s “commitment to the thresholds.”

In a research note, Barclays Capital economist Peter Newland said the minutes “added to the sense that Fed policymakers are laying the groundwork.