Santa Clara County (SCC): What to do with Excess Capital Gains
A revocable trust does not provide the ability to shelter capital gains above the exclusionary amount from taxes.
Over the past fifteen years, the value of homes in Santa Clara County has more than doubled.
In January 2000, the median price for single-family, re-sale homes was $433,500. In September 2015, the median price was $960,000.
Many homeowners will find they may owe capital gains tax on the sale of their property.
Most homeowners know they can exclude $250,000 of their capital gains. For married couples filing jointly, the exclusion goes up to $500,000.
The exclusion is only for your principal residence. You must have lived in the home for an aggregate of at least two of the five years before the sale.
One nice thing about calculating your gain is it is based on your home’s selling price minus deductible closing costs, selling costs and your tax basis in the property. Your basis is the original purchase price, plus purchase expenses, plus the cost of capital improvements, minus any depreciation and minus any casualty losses or insurance payments.
Deductible closing costs include points or prepaid interest on your mortgage and your share of the prorated property taxes.
Of course, like any law, there is a lot of fine print. If you are planning on selling your home, we highly recommend consulting with an accountant or real estate attorney.
If your capital gains exceeds the exclusionary amount, then things can get very interesting.
We are now in the land of trusts.
There are three basic trusts: revocable, irrevocable and the charitable remainder trust.
A revocable trust does not provide the ability to shelter capital gains above the exclusionary amount from taxes.
Irrevocable trusts come in two flavors: simple and complex. In both types, the trust would have to pay taxes on the capital gains from the sale of a home. That doesn’t sound good.
The last time, the charitable remainder trust, will exempt gains from all taxes. Of course, there is a catch: you do not get to use all the proceeds from the sale of the home at once.
Using this type of trust and other financeing toolsto exlude capital gains are very complicated and beyond the purview of this article. Please contact me if you want
Needless to say, please consult an accountant or attorney for a detailed explanation.
September Stats (SCC)
Single-Family Homes
Year-Over-Year
- Median home prices increased by 13.1% year-over-year to $1,200,000 from $1,061,000.
- The average home sales price rose by 12.0% year-over-year to $1,570,000 from $1,401,360.
- Home sales fell by 12.9% year-over-year to 365 from 419.
- Total inventory* fell 16.6% year-over-year to 790 from 947.
- Sales price vs. list price ratio rose by 1.4% year-over-year to 106.5% from 105.0%.
- The average days on market fell by 22.1% year-over-year to 23 from 30.
Month-Over-Month
- Median home prices slipped by 2% to $1,200,000 from $1,225,000.
- The average home sales price fell by 1% to $1,570,000 from $1,586,620.
- Home sales down by 2.1% to 365 from 373.
- Total inventory* increased 1.5% to 790 from 778.
- Sales price vs. list price ratio dropped by 2% to 106.5% from 108.7%.
- The average days on market increased by 14.1% to 23 from 20.
Condominiums
Year-Over-Year
- Median condo prices increased by 28.3% year-over-year to $803,000 from $626,000.
- The average condo sales price rose by 26.2% year-over-year to $840,528 from $665,832.
- Condo sales fell by 18.4% year-over-year to 111 from 136.
- Total inventory* fell 18.5% year-over-year to 220 from 270.
- Sales price vs. list price ratio rose by 5.4% year-over-year to 108.5% from 102.9%.
- The average days on market fell by 15.9% year-over-year to 18 from 21.
Month-Over-Month
- Median condo prices improved by 10.9% to $803,000 from $724,000.
- The average condo sales price rose by 9.1% to $840,528 from $770,339.
- Condo sales up by 18.1% to 111 from 94.
- Total inventory* increased 17.0% to 220 from 188.
- Sales price vs. list price ratio dropped by 0.4% to 108.5% from 109.0%.
* Total inventory is active listings plus contingent or pending listings. Active listings do not include contingent listings.
Call or email me if you have any questions.
For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.
TILA-RESPA Integrated Disclosure Rule
Starting October 3rd, the Consumer Financial Protection Bureau has introduced a new rule for loan estimates and closing disclosure.
The rule includes two new “Know Before You Owe” forms, which will replace four current forms. By introducing forms that are expected to be less confusing, the goal is to make sure consumers understand at every step along the way the terms of their loans and the fees they are paying. The new forms will be used in every mortgage transaction.
The Loan Estimate and the Closing Disclosure replace four existing forms: the Good Faith Estimate and the initial Truth-in-Lending disclosure provided when you apply for a loan, and the HUD-1 Settlement Statement and the final Truth-in-Lending form issued just before closing.
The Loan Estimate form includes the interest rate, the fees for both lender and third-party services such as appraisals and title insurance, estimated closing costs and whether the borrower has the right to shop for services like title insurance. It also lists any prepayment penalties or future expected changes in interest rates. Lenders will be required to provide this form within three days of a loan application.
The Closing Disclosure includes the final figures for closing costs, prepaid taxes and insurance, payments, fees and mortgage terms, plus what costs are being paid by buyer and seller and, for the first time, how much is paid to each real estate company involved in the transaction.
Borrowers will receive the Closing Disclosure three days in advance, rather than waiting until the day of the closing to see the final figures.
Another big change is that the closing documents now will be drawn up by lenders, rather than by closing agents. While the law doesn’t require the lender to draw up the documents, the law holds the lender accountable for errors.
Investors Corner
July Home Price Gains Concentrated in the West
According to the S&P/Case-Shiller Home Price Indices
New York, September 29, 2015 – S&P Dow Jones Indices today released the latest results for the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices. Data released today for July 2015 show that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to https://goo.gl/sg8KMZ
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San Mateo County (SMC):Where are All the Homes for Sale?
Homeowners caught in affordability squeeze, are staying put, REALTOR survey finds
LOS ANGELES (August 26) –Even with rising home prices over the past few years, many homeowners who have considered selling are deciding not to because they are caught in an affordability squeeze that is compounded by a lack of inventory, according to findings from the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) “2015 Survey of California Homeowners.”
More than one-third (35%) of homeowners have considered selling their home in the past year, and of that share, about two-thirds (64%) are reluctant to sell because they are finding they can’t afford the home they really want, the survey found.
C.A.R.’s Survey of California Homeowners also found that more than half (59%) of homeowners have not seriously considered selling their home in the past year, with more than half (60%) saying their current home will be their retirement residence. For those who have been in their home 15 years or more, that figure rises to 70%.
But for others (44%), the affordability crunch, higher property taxes, and home prices are keeping them in their current home.
In first-quarter 2012, when housing in California was at its most affordable, a median income of $56,324 was needed to purchase a median-priced home. In second-quarter 2015, that figure jumped to $96,160, with 99% of that required income increase attributable to home price increases.
Sixty-one percent of all homeowners could be prompted to sell if they got the price they want for their home; 56% would sell if they had a gain in their home value; and 53% would sell if a better or equivalent house was available.
Of homeowners who have considered selling, 56% said they desire a larger home, and 48% because they desire a smaller home. Those who have owned their home less than 15 years were nearly twice as likely (66%) to consider selling due to their desire for a larger home than those who have owned their home over 15 years (34%).
Additional findings from C.A.R.’s “2015 Survey of California Homeowners” include:
- Forty-five percent of homeowners have considered moving out of state, with Texas (15%), Oregon (11%), New York (9%), and Arizona and Nevada tied (8%) as the top five states where homeowners have considered moving.
- Sixty percent of homeowners bought their home within the past 15 years.
- Twenty-four percent of homeowners don’t have a mortgage, and those who bought their home 15 or more years ago were more than twice as likely not to have a mortgage as those who bought within the past 15 years. The majority of homeowners with a mortgage (77%) have an interest rate below 5%.
- Twenty-seven percent of homeowners have tapped into their equity. Those who bought 15 or more years ago or were more likely to have tapped into their equity (32%) than those who bought within the past 15 years (24%).
- Nearly one-third of homeowners (32%) indicated a Craftsman-styled bungalow is their dream home, beating those preferring mansions by more than double (14%) and Neo-Colonial (19%). California is considered the center of the architectural arts and crafts movement and is home to the majority of Craftsman-styled housing.
- Nearly half of homeowners (45%) have children residing with them, with 83% of children being minors.
September Stats (SMC)
Single-Family Homes
Year-Over-Year
- Median home prices increased by 10.1% year-over-year to $1,195,000 from $1,085,000.
- The average home sales price rose by 12.2% year-over-year to $1,587,870 from $1,415,500.
- Home sales fell by 8% year-over-year to 310 from 337.
- Total inventory* rose 27.6% year-over-year to 688 from 539.
- Sales price vs. list price ratio rose by 1.3% year-over-year to 105.8% from 104.5%.
- The average days on market fell by 25.3% year-over-year to 24 from 32.
Compared To Last Month
- Median home prices improved by 1.3% to $1,195,000 from $1,180,000.
- The average home sales price rose by 3.2% to $1,587,870 from $1,539,010.
- Home sales down by 10.1% to 310 from 345.
- Total inventory*s dropped 12.7% to 688 from 788.
- Sales price vs. list price ratio dropped by 0.7% to 105.8% from 106.6%.
- The average days on market increased by 9.4% to 24 from 22.
Condominiums
Year-Over-Year
- Median condo prices increased by 22.0% year-over-year to $762,500 from $625,188.
- The average condo sales price rose by 22.1% year-over-year to $827,568 from $677,726.
- Condo sales rose by 2.8% year-over-year to 110 from 107.
- Total inventory* rose 7.8% year-over-year to 179 from 166.
- Sales price vs. list price ratio rose by 1.7% year-over-year to 104.8% from 103.0%.
- The average days on market fell by 31.5% year-over-year to 18 from 26.
Month-Over-Month
- Median condo prices improved by 6.6% to $762,500 from $715,000.
- The average condo sales price rose by 2.3% to $827,568 from $809,112.
- Condo sales down by 7.6% to 110 from 119.
- Total inventory* dropped 20.1% to 179 from 224.
- Sales price vs. list price ratio dropped by 2.2% to 104.8% from 107.1%.
- The average days on market dropped by 8.7% to 18 from 20.
* Total inventory is active listings plus contingent or pending listings. Active listings do not include contingent listings.
Call or email me if you have any questions.
For further details and a city-by-city breakdown statistics, go to http://avi.rereport.com/market_reports.
