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John Walsh
John Walsh
JW Real Estate, LLC
Andover, MA 01810

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Thoughts on the real estate market from John Walsh, owner of JW Real Estate, LLC.

Inventory Reductions

As I have mentioned in the past, most data regarding real estate is backward looking, and by the time you receive the information, the time to act on it has passed. However, one data point that helps predict future events is inventory, or the number of homes on the market.

Over the last few months, virtually all reports (local, state & national) that I have seen show a reduction in inventory. More importantly, as I enter new clients into the Multiple Listing Service (MLS) to receive property listings matching their search criteria via e-mail, I am surprised at how few properties are available. (I just entered a search that would have generated 50+ matches a year ago, and I received 17!)

As always, the most important issue is how this trend could affect you, specifically, in your own real estate transactions.

Given the lack of inventory, if your home has a feature that is a drawback for you, personally, but it's not a generic defect, now is a great time to place that home on the market. In the alternative, if your property has one or more selling features that you don't care about, for whatever reason, now is an ideal time to sell it and buy a home that doesn't have those features.

For example, you may own a legitimate, functional three-bedroom home which flows nicely, but really only need two bedrooms plus an office (much more difficult to sell). If you see a three-bedroom home in which you need to go through one bedroom in order to access another, this may fit your needs perfectly. If the home has been sitting on the market, you can likely get it for a good price. And with so little inventory on the market, your three-bedroom home should sell quickly if presented properly and priced right. One caveat, however: if you buy a home that isn't easy to sell, unless you can rectify the defect, you will encounter similar challenges when you go to sell that home in the future.

Every situation is unique, so if you have any questions, feel free as always to call (978-423-9309) or e-mail ( me at any time to discuss your options.

Real Estate Tax Issues, Post Election

Whatever your position on the recent elections, now that they have been decided, there will be consequences concerning real estate tax issues.

First, there has been much confusion and discussion about a 3.8% real estate tax included in Obama Care. Now that President Obama has been re-elected, Obama Care is a certainty. With that said, there is a 3.8% tax in the bill and, while it is not specific to real estate, it does affect certain real estate transactions. The tax will affect only higher income demographics and will apply only for significant capital gains. (See prior entries for more specifics on this tax.)

Along with the tax described above, it is likely that new revenue will be required to avoid the fiscal cliff that is to occur by year's end if the government does not act. There are several revenue/tax options on the table which could affect many of you. Depending on your circumstance, you may want to let your elected officials know where you stand.

The mortgage interest deduction is likely in play and should be the most concerning to anyone who owns their primary residence and has a mortgage on the property. As interest is front-loaded on mortgages, the newer the mortgage you have, the greater advantage you receive from the deduction. While the deduction will likely remain, there is a good chance it will be reduced.

Similar to the 3.8% tax mentioned above, there is a capital gains exemption on your primary residence which is based on income levels and amount of gain. This exemption may also be modified or eliminated.

For anyone involved in a short sale, under tax law, the forgiveness of debt creates a taxable event and is considered income. Under current law, there is an exception for mortgage debt forgiveness relating to short sales. However, this exception is due to expire (I believe at the end of the year), so it is incumbent upon anyone engaged in a short sale to determine whether the exception will be in place at the time of your closing.

These are just a few financial issues to consider relating to the the sale of property.

Please keep in mind that I am not an accountant, tax attorney, or financial planner. This information is cursory in nature and anyone concerned with the issues mentioned above needs to consult an expert for details.

Declining Inventory Could Skew Annual Trends

Over the past few weeks, the data points with respect to housing in general have been fairly consistent. Prices are stabilizing and, in some areas, increasing slightly. Homes are selling closer to their asking prices and are requiring fewer days on the market in order to sell. The above has resulted in a dearth of inventory, which leads me to my point...

Since the market decline which began in 2006, as a general proposition there has been a glut of inventory. Given annual cycles, many sellers chose to take their properties off the market during this time of year as the summer months are typically a slow time for buyer activity in the Northeast. However, this may be a year to buck this trend.

I have personally seen a lack of inventory of quality properties, particularly in the more affluent areas and at price points which would cater to upper-middle class income buyers.  My suggestion is that anyone looking to sell should take the pulse of his or her local market (I recommend doing so here) and not necessarily assume that the next month will be the "slow season". If there is no or little inventory comparable to your property, a contrarian play may be the way to go this year!

As an aside, real estate professionals plan their lives around annual trends and the vast majority take advantage of this next month or so to vacation. This includes agents, lenders, brokers, appraisers and attorneys, so you may want to add an extra week's time when planning a closing date.

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