Martin Crutsinger
USA Today

WASHINGTON — Sales of existing homes fell more sharply than expected in June as the housing industry continued to be bruised by the worst slump in more than two decades.

The National Association of Realtors reported Thursday that sales dropped 2.6% last month to a seasonally adjusted annual rate of 4.86 million units. That’s more than double the expected decline. It leaves sales 15.5% below where they were a year ago.

The downward slide in sales is depressing prices, too. The median price for a home sold in June has dropped to $215,100, down by 6.1% from a year ago. That was the fifth largest year-over-year price drop on record.

The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units, up 0.2%. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.

Sales were down in all regions of the country except the West, which posted a 1% sales increase. Sales fell 6.6% in the Northeast, 3.4% in the Midwest and 3.1% in the South.

Analysts say that until the inventory level is reduced to more normal levels, the slump in housing is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures, however.

Seeking to address the housing crisis, Congress is moving to pass a sweeping package of rescue measures. The plan includes support to keep as many as 400,000 homeowners from losing their homes to foreclosure and a federal lifeline to bolster troubled mortgage giants Fannie Mae and Freddie Mac.

The House passed the bill Wednesday and the Senate is expected to pass the proposal in coming days, sending it to President Bush. The president has dropped a threatened veto over a portion of the bill.

Lawrence Yun, chief economist for the Realtors, said that the housing rescue bill should play a major role in helping the housing market to rebound. He said an especially significant feature is a tax break worth up to $7,500 for first-time home buyers who purchase between April 9 of this year and July 1, 2009.

Yun estimated that up to 3 million first-time home buyers could qualify for that tax break, providing a significant boost to sales at a critical time.

“I think we are very near to the end of the housing downturn,” Yun said.

Other private economists are not as optimistic. They worry that the relief supplied by Congress will not be enough to relieve the pressure weighing on housing and the overall economy now.

Copyright 2008 The Associated Press. All rights reserved

 

Marketing your rental unit

Sun

Every landlord wants to find the ideal tenant — the person who always pays rent on time, never disturbs others, doesn’t complain or cause conflicts and keeps the premises in better condition than when he or she moved in. While this theoretical ideal may be unattainable, the way you maintain and market your property will affect what type of tenants you attract.

Effective marketing will increase your chance of attracting the ideal tenant for your situation. The more clearly you state the benefits of your premises, the greater the odds of attracting appropriate prospects.

Someone offering a tiny bachelor apartment will have a different market than someone renting a spacious penthouse with extra features, such as a fireplace and a fantastic view. Consider the profile of the people you are trying to reach and then advertise in the places where they would be likely to look for rental premises.

If you are renting a fairly basic basement apartment, you have a good chance of attracting people willing to live in a basement for the benefit of a lower monthly rent. University campuses, postings in local supermarkets or “accommodations available” advertisements in newspapers might be the best place to advertise this type of rental.

If you have an expensive condo to rent, advertise where people with the appropriate income might search. The business-focused newspaper classifieds, or working with a rental locator at a real estate agent’s office might work best.

If you are not sure where people look for rentals, ask. Talk to several people in the same demographic as prospective tenants.

EVALUATING PROSPECTIVE TENANTS

Every landlord wants to find good tenants – ones who pay the rent on time and take care of their rental property. Finding the best tenant can be offset by the need to have the premises rented within a narrow timeframe. While time to show the unit, accept and review applications and do background checks may be limited, a hasty decision could cost you money in the long run. If the wrong tenant moves in, you may end up losing money due to damages or disputes.

CHOOSE WISELY

If you can afford a possible rent loss while waiting to fill the unit, take the extra time to make the right choice of tenant.

You should thoroughly research a prospective tenant before making a final decision. Getting candidates to fill in a rental application and properly screening for applicant suitability before accepting a new tenant are vital. If you accept tenants without screening and verifying their information, terminating the rental agreement may be difficult even if you discover that they provided false information.

Beyond credit information, try to discover what kind of tenant will be living in your unit. Ask former landlords about the tenant’s character and past rent-payment patterns. Consider talking to even the last two or three landlords to get a clear idea.

CHECKS FOR SCREENING TENANTS

? Check the applicant’s credit bureau history and banking history.

? Confirm the applicant’s employment situation.

? Check the applicant’s tenancy history/evictions, if available.

? Check court records, if available.

? Check the applicant’s references and consider contacting previous landlords going back two or three tenancies.

Information provided by CMHC. For more landlord/tenant information visit www.cmhc.ca or the Residential Tenancy office at www.rto.gov.bc.ca

© The Vancouver Sun 2008

USA Today

WASHINGTON (AP) — President Bush dropped his opposition Wednesday to legislation aiming to calm the chaotic housing market despite his objections to a $3.9 billion provision.

The House was expected to vote on the bill Wednesday, and it could become law as early as this week.

Under the bill, the government would help struggling homeowners get new, cheaper loans and would be allowed to offer troubled mortgage giants Fannie Mae and Freddie Mac a cash infusion.

The Bush administration and lawmakers in both parties teamed to negotiate the measure, which pairs Democrats’ top priorities — federal help for homeowners facing foreclosure and $3.9 billion for neighborhoods hit hardest by the housing crisis — with Republicans’ goal of reining in mortgage giants Fannie Mae and Freddie Mac while reassuring financial markets of their stability.

Bush had objected to the $3.9 billion provision in the measure, saying that it was aimed at helping bankers and lenders, not homeowners who are in trouble.

Treasury Secretary Henry Paulson, in fact, made the same complaint in a talk Wednesday with reporters, calling it a “wasteful” provision. But he also said the agreement will send a strong message to investors around the world and will be key to helping the nation turn the corner on the housing crisis.

“This is a very important message that we are sending to investors around the world,” Paulson said, adding that it would play a key role in “turning the corner” on the housing crisis.

White House press secretary Dana Perino announced Bush’s switch in a telephone conference call with reporters. “We believe this is not the time for a prolonged veto fight but we are confident the president would prevail in one,” she said.

It hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and buy an unspecified amount of their stock, if necessary, to prop up Fannie Mae and Freddie Mac, two companies chartered by Congress. The two companies back or own $5 trillion in U.S. mortgages — nearly half the nation’s total.

“The positive aspects of the bill are needed now to increase confidence and stability in the housing and financial markets,” Perino said. “While we have concerns with other aspects of the bill, it is important that the new authorities are put in place promptly. And so President Bush will accept Secretary (Henry) Paulson’s recommendation to sign the bill.”

She said she expected that the $3.9 billion provision would be included in the final legislation. “With Congress scheduled soon for yet another recess,” she said, “the risk of not having a bill until at best the middle of September — if they even were act then — is not a risk worth taking in the current environment.”

Congressional analysts estimated Tuesday that the rescue could cost $25 billion, but predicted there’s a better than even chance it won’t be needed at all.

The bill would let hundreds of thousands of homeowners trapped in mortgages they can’t afford on homes that have plummeted in value escape foreclosure by refinancing into more affordable, fixed-rate loans backed by the Federal Housing Administration. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.

The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the FHA.

It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time home buyers for people who bought homes between April 9, 2008, and July 1, 2009. It also allows people who don’t itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes. That chiefly benefits homeowners who have paid off their homes and can’t claim a deduction for mortgage interest.

And it increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.

The White House, which initially denounced the FHA rescue as too burdensome on the government and risky for taxpayers, dropped most of its objections to the measure in recent weeks in search of a swift deal. The urgent request by Paulson to throw Fannie Mae and Freddie Mac a federal lifeline acted as a powerful locomotive for a deal.

The bill sets a cap of $625,000 on the loans that Fannie Mae and Freddie Mac may buy and the FHA may insure. It lets them buy and back mortgages up to 15% above the median home price in certain areas.

Lawmakers abandoned efforts to place conditions on any Fannie and Freddie rescue, but the bill hands the new regulator approval power over the pay packages of executives at the companies regardless of whether the government moves to financially reinforce them.

It also counts any federal infusion for the mortgage giants under the debt limit, essentially capping how much the government could spend to stabilize the companies without further approval from Congress. As of Tuesday, the national debt that counts toward the limit stood at about $9.5 trillion, roughly $360 billion below the statutory ceiling.

Copyright 2008 The Associated Press. All rights reserved

 

Don Cayo
Sun

Is it fair, I asked B.C.’s revenue minister, to charge property transfer tax on someone’s own assets — on improvements they’ve long since paid for, and paid the sales tax on — when, after a period of leasing, they finally buy the land?

Is it rational, I asked the small business minister, to nail some start-up businesses with an extra tax that richer competitors don’t pay just because a cash-strapped owner must lease land for a few years until he can afford to buy?

I asked these questions a dozen different ways on Monday. And the minister I asked — in both cases Kevin Krueger, who took over both portfolios a month ago today — assiduously ducked.

Krueger’s rationale for dodging is that these issues relate to a case that may come before him on appeal.

He’s right, of course, to assume I’d report on and interpret his answers in the context of at least one specific case. I wrote last week about how theme park owner Gary Semft of Harrison Hot Springs was hit with $3,700 in extra PTT on the value of improvements he had made to leased land he eventually bought.

Readers have also told me about several more PTT injustices, including the particularly offensive practice of charging PTT on people’s own cottages when they buy formerly leased recreational land from the Crown. Talk about sharp business practices — the government nails its own clients with a spurious charge just because it can.

This is a bully’s tactic. No private firm could pull it off, and most would be ashamed to try. So I understand why Krueger might not want to give a writer grist for a column on these issues.

But I still think his excuse for ducking my questions is a crock. Taken at face value, it would mean he could never say anything about any tax, because every tax his department collects could conceivably lead to an appeal that comes before him.

On the plus side, Krueger did talk a bit — in very general terms — about his duty to be fair.

He made the point, no doubt true, that sometimes legislation gives him and his staff absolutely no leeway, even if they think an outcome is unfair. But he also conceded — and this is significant, if he follows through — that when inflexible legislation leads to an unfair outcome, he and his colleagues have a duty to fix it.

He even gave an example — a first-time homebuyer who, thanks to a technicality that wasn’t his fault, lost his eligibility for a tax break. Although the law left no room for him to intervene, he said, it did convince him the law needs amending to make it flexible enough to deal with similar cases in future. This may be cold comfort for the poor sap who got stuck with a few thousand dollars in extra expenses, but it’s a much better outcome than when the bureaucracy shrugs at an unfairness and does nothing.

Krueger refused, however, to signal whether he thinks the property transfer tax law is too inflexible, too prone to unfairness, and thus due for reform.

I’m guessing that, if he hasn’t already felt a lot of pressure on this already, he soon will. My in-box these days is reflecting a heightening concern with the PTT, which seems to be the latest area where tax auditors are throwing their weight around in ways that are, at best, hard-nosed and, at worst, arbitrary and mean.

Businesses, especially, seem to have legitimate gripes. They’re supposed to pay PTT on “fair market value,” but that’s an elusive number that BC Assessments often doesn’t get around to calculating until a year after a sale. Even then, the assessment is often an “estimate” (i.e., an assessor’s wild guess). Thus the business must — usually at the cost of considerable time and money — fight to have it reduced to a realistic amount. This adds not only costs but also an unnecessary amount of uncertainty to business property transactions.

In a perfect world, the property transfer tax would be scrapped. It’s an ill-conceived policy. It’s a drag on business start-ups, and an extra cost on the already daunting cost of home ownership.

These problems are made worse because the law hits at the worst time, when people who’ve just made a big investment can least afford it.

it so perverse — sky-high property prices — also makes it a cash cow for the government, which is not going to stop squeezing this teat any time soon.

That leaves the moral issue: Fairness. Government should feel obligated to spurn the kind of sharp practice that makes most voters squirm. Even if I had the power to do so, I simply would not try to impose on people whom I do business with a charge for retaining assets they already own. I think it’s wrong. And I’m betting a big majority of my readers — i.e., other voters — agree.

If we wouldn’t do it, Mr. Minister, neither should you or your colleagues do it on our behalf. So add this to the list of bad tax law that you guys have a duty to fix.

© The Vancouver Sun 2008