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Erika Kauzlarich-Bird: Homebuyers optimistic about market, prices

Real Estate Talk

Posted: December 20, 2012 2:00 a.m.
Updated: December 20, 2012 2:00 a.m.

Based on what I see here in the Santa Clarita Valley, I’m unsurprised at the result of a statewide survey of recent homebuyers.

The survey found optimism about the housing market on the rise with three-fourths of buyers confident prices will increase over the coming decade.

Twenty-five percent of the respondents in the California Association of Realtors’ 2012 Survey of California Homebuyers said they believe prices will rise in one year.

Another 41 percent said it will take five years for prices to rise while 73 percent of buyers said prices will rise in 10 years.

That’s a dramatic improvement from three years ago when the same question yielded much lower percentages: 8 percent, 35 percent and 60 percent, respectively.

The survey also found that the mortgage interest deduction is extremely important to homebuyers across all income levels and age groups, with 79 percent of all homebuyers saying that the mortgage-interest and property-tax deductions were “extremely important” in their decision to buy a home.

When broken out by income, the findings were similar across all income levels, with 80 percent of those earning less than $100,000 annually, 78 percent earning between $100,000 and $199,999, and 81 percent earning more than $200,000 annually saying the deductions were “extremely important” in their buying decision.

Likewise, when broken out by age group, the deductions were equally important to Generation Y, Generation X, and baby boomers, with 76 percent, 82 percent and 80 percent indicating the mortgage interest and property tax deductions were “extremely important” when deciding to buy a home.

“The mortgage interest deduction plays an important role in buyers’ monthly budgeting,” said Don Faught, CAR president. “Without this tax advantage, housing affordability would be negatively impacted and potentially price out many would-be buyers.”

None of the buyers questioned expected prices to drop in the near future, while 45 percent cited today’s low prices as the chief reason they purchased a home.

Ninety-three percent of buyers obtained a fixed-rate loan, up from 84 percent in 2011, reflecting buyers need for certainty as the market gets back to basics.

Keep the deduction

Congress, as part of negotiations on avoiding the so-called “fiscal cliff,” has made direct reference to “closing loopholes” and “limiting deductions” as a way to raise revenues. Limiting or eliminating a homeowner’s deduction of interest paid for home loans on income tax returns is under consideration.

Losing the mortgage interest deduction would disproportionately affect the middle class because a larger proportion of the middle class takes the deduction.

In California, 89 percent of owners who took the mortgage interest deduction earned less than $200,000. Losing the deduction would cost the average California taxpayer more than $3,900.

Realtors urge the public to get involved by calling Congress to ask that the mortgage interest deduction be preserved.

The public may reach Congress by calling 202-224-3121, Monday through Friday, from 9 a.m. to 6 p.m. Eastern time. The Capitol switchboard operators will help callers identify their member of Congress and connect them. Get the word out. Many owners and prospective buyers are unaware that the mortgage interest deduction is at risk.

Erika Kauzlarich-Bird is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.


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