Perceptions of U.S. housing boosted by international investors

by Dan Krell ©2012
DanKrell.com

border signA June 11th report by the National Association of Realtors® discussed how international home buyers are an increasingly important segment of the U.S. housing market (realtor.org). The NAR release, “International Sales Continue to Climb in U.S. Market, Realtors® Report,” indicated that the dollar volume of U.S. homes bought by foreign home buyers increased about $16.1 billion over the last year. As encouraging as this may sound, there’s more to the story than you might imagine.

Interestingly, the report stated that average price paid for a U.S. home by an international home buyer is $400,000; and 30% of the homes purchased were priced between $250,000 and $500,000. Because foreign home buyers typically find it difficult to obtain a mortgage, it was reported that 62% of the purchases were cash deals. The NAR report stated that although many of these home purchases were for primary residences, a majority of international home buyer purchases were for vacation and investment uses.

Would you believe that 55% of international home buyers originated from Canada, China, United Kingdom, Mexico, and India? Canada accounted for the largest number of foreign home buyers (24%), followed by China (11%), the U.K. and Mexico (6% each).

But before you decide to learn a new language, you should note that four states have received the most attention from these home buyers; Florida, Arizona, California, and Texas “accounted for 51% of the purchases.” Of these sales, Florida accounted for 26% of all foreign home purchases, and California coming in second with 11% of foreign purchaser sales.

This market segment is not a new phenomenon; international home buyers have participated in the U.S. housing market for a long time. It just seems as if this segment of home buyers has been stronger during economic turmoil (Are you old enough to remember the influx of Middle East investors during the 1970’s and Japanese investors during the 1980’s?). The increasing number of international home buyers investing in the housing market is a tribute to the perceived value of U.S. real estate.

By the way, the influence of international sales has not gone unnoticed by Congress either. In an effort to help stimulate this sector of the housing market, S. 1746: Visa Improvements to Stimulate International Tourism to the United States of America Act was introduced in October 2011, by Senators Charles Schumer [D., N.Y.] and Mike Lee [R., Utah], and H.R. 3341: Visa Improvements to Stimulate International Tourism to the United States of America Act, was introduced in November 2011 by Rep. Mazie Hirono [D-HI2] and Rep. David Dreier [R-CA26]). These bills offered resident visas to foreign investors who invested at least $500,000 in U.S. real estate. However, some have criticized such stimulus as an empty gesture because international home buyers may not need additional incentive to purchase homes in the U.S.

Will foreign home buyers save the housing market, as a U.S. News and Report piece suggested (October 28, 2011)? Unlike the clichéd climax of a dramatic film noire, when the foreign investor saves the day, the answer may be “yes” and “no”. Although housing is receiving an increased amount of attention from foreign investors, it is unlikely that the increased activity itself would save the U.S. housing market. However, the increased foreign investment in U.S. housing may boost the perceived value of housing and the perception of home ownership.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 18, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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Understanding property tax assessments in Montgomery County MD

It’s the time of year when property tax bills are issued to home owners. And understanding property tax assessments can be confusing. A common question among home owners and home buyers is, “how are property taxes calculated, and what is the money used for?”

Understanding property tax assessments

homes

Information about property assessments and taxation is conveniently posted on the internet by the Maryland Department of Taxation and Assessments (www.dat.state.md.us) and the Montgomery County Department of Finance (www.montgomerycountymd.gov). There are two factors that determine your property tax bill, the property assessment and the property tax rate.

According to the Maryland Department of Taxation and Assessments (MDTA), “Properties are reassessed once every three years and property owners are notified of any change in their assessment. Assessments are certified by the Department to local governments where they are converted into property tax bills by applying the appropriate property tax rates.”

Because Maryland does not impose any restrictions or limitations, property tax rates vary throughout the State. This means that counties and cities are free to set the rates needed to fund government services. According to the Montgomery County Department of Finance, “The real property tax rate, which is set each year by the County Council, is an ad valorem tax, meaning it is applied to the assessed value of the property. The fully phased-in assessed value equals the full cash value of the property…”

The total tax rate is a combination of the State, county, and (for some home owners) municipal tax rates. The rate is typically expressed in dollar amount per $100 of assessment; the MDTA gives this example to understand how property tax rates are expressed, “for a property with a fair market value of $100,000 the property taxes would be calculated by dividing the assessment by 100 and multiplying the product by the property tax rate. Using an overall tax rate of $1.08 per $100 for this example ($1.00 local property tax plus $.08 state property tax), the amount of property taxes due would be calculated: $100,000 divided by 100 times $1.08 or $1,080.00.”

The MDTA explains, “The property tax is primarily a local government revenue. Counties and cities depend on the property tax and a portion of the income tax to make up their budgets.” Montgomery County levies a general tax to fund basic services, such as police, elementary and secondary education, the community college, transportation, health and social services, and libraries. Additional county taxes are levied to fund public transportation, fire and rescue services, and acquisitions by the Maryland-National Capital Park and Planning Commission. Seven additional county taxes are also levied on residents in “specially defined areas.”

If you disagree with your property assessment, you can appeal it by following the instructions provided by the MDTA. The assessment notice has an appeal form, which must be filed within 45 days of the date on the notice (a home buyer has 60 days from the date of property transfer to appeal the property tax by submitting an appeal of the property value, but only if the transfer of the property occurs after January 1st and before the next taxable year).

Know your rights throughout the property assessment and appeal process; SDAT provides  “Property Owner’s Bill of Rights”   (https://dat.maryland.gov/realproperty/Pages/Bill-of-Rights.aspx) to summarize sections of the Tax-Property Article which deal with appeals, assessment notification, and public information.

Original published at https://dankrell.com/blog/2012/06/13/understanding-property-tax-assessments-in-montgomery-county-md/

By Dan Krell
Copyright © 2012

This article is not intended to provide nor should it be relied upon for legal and financial advice.  Using this article without permission is a violation of copyright laws.

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Difficult neighbors

difficult neighborsThere’s not a whole lot that will test your patience more than difficult neighbors. Neighbors, for the most part, tolerate each other regardless of their idiosyncrasies. However, it seems that the closer in proximity you live to your neighbor, the potential for friction increases; sometimes a worst case scenario develops and tempers flare. Common neighbor complaints typically concern pets, parking, excessive noise, and the maintenance of the home exterior and the lawn. When neighbor complaints arise, the offending neighbor is often characterized as being inconsiderate.

From a distance, the issues may seem inconsequential, but we find the situation and behavior of those who are involved in the neighborly dispute to be entertaining. The idea is so entertaining that Hollywood has capitalized on the theme and has created a number of hit movies. Sure, the “difficult neighbors” portrayed in the cinema is an exaggeration of traits that we would consider as meddling and zany (such as Dan Akroyd’s character in “Neighbors [1981],” or secretive and suspicious (such as Tim Robbins and Joan Cusack in “Arlington Road [1999]).” Some films depict a new resident to find out the entire neighborhood acts bizarrely, such as portrayed in “The ‘Burbs (1989)” or the “Stepford Wives (1975 and 2004).

As much as we enjoy the over the top behavior depicted in “difficult neighbors” films, we like to think everyone tries being considerate of their neighbors in real life. However, if this were true, then “good neighbor laws” would not be enacted.

Montgomery County enacted its own “good neighbor laws” last year. These laws affect: home based businesses (limiting the amount of visits into the home as well as possibly limiting parking depending on the type of home based business); parking of commercial vehicles (except for temporary parking, parking for heavy commercial and recreational vehicles are prohibited from parking on residential streets); and off street parking (must be on surfaced areas, unregistered vehicles are not allowed on the property, and there may be limitations on the amount of front yard that can be surfaced for parking). Of course, these “good neighbor laws” are enforced by [neighbor] complaints.

neighborhoodCoping with annoying and meddling neighbors on a daily basis can be challenging, but how about when you’re selling your home? Since most neighbor issues are caused by a lack of communication, experts recommend trying to speak to your neighbor first. Once talking with your neighbor, you may find you share a few commonalities. You may even be surprised to find out that your neighbor is in need of your assistance in cleaning their yard, or towing the unused cars away.

Living in a disorderly neighborhood breed mistrust. If you find that your neighbor is not responding with your attempts to communicate, then gaining support from other neighbors may assist you in getting your neighbor to be more considerate.

Of course, if your difficult neighbors are totally unresponsive, you may find yourself seeking assistance through official channels; such as making complaining to your HOA, local officials, or even the police. Although not all HOAs are good at enforcing their rules, complaints made to local authorities are often investigated and handled through official channels.

Don’t wait for a home sale to mend your relationship with your neighbor. Besides smiling regularly, experts suggest that long term neighbor problems may be avoided by solving issues when they arise.

Original located at https://dankrell.com/blog/2012/06/07/coping-with-neighbors/

By Dan Krell

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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

Skepticism increases 1.3% on conflicting housing data

by Dan Krell © 2012
DanKrell.com

housing dataWhen the National Association of Realtors® announced last week that April’s existing home sales increased 3.4% to an annually adjusted rate of 4.62 million compared to a downwardly revised 4.47 million in March (http://www.realtor.org/news-releases/2012/05/april-existing-home-sales-up-prices-rise-again), I have to admit I was a bit skeptical. The local market is not exactly humming along, so as I read in the above referenced NAR release that April’s existing home sales rose 10% over the figure from April 2011, I thought some perspective is needed.

Let me quote you some housing statistics. The number of Montgomery County single family homes that sold increased 5.1% in February, 14.7% in March, 33.9% in April and 27.9% in May (MRIS data reported by the Greater Capital Area Association of Realtors®; gcaar.com). These numbers are not from 2012; but rather, these are the local stats from 2010 compared to closings from 2009. Yes, as you remember – 2010 was a spectacular year for local real estate!

Sarcasm aside, the number of Montgomery County single family home closings increased 5.8% during April 2012 (compared to 2011); and the number of Montgomery County condo closings also increased 8.1% during the same time. But, Montgomery County year-to-date settlements are still below the number of settlements that occurred during the same time in 2011 (-1.4% for single family homes; and -2.8% for condos). Although the 690 single family home settlements that occurred in April 2012 is higher than 652 that occurred in April 2011, the 2,034 single family home settlements that occurred year-to-date through April 2012 is lower than the 2,062 settlements that occurred the same period in 2011. Regardless, the number of settlements is far lower than what we have seen in past “normal” markets (for example, GCAAR reported that there were 849 settlements of Montgomery County single family homes in April 2001).

It must be noted that although the first half of 2010 seemed to be on a role, the number of 2010 Montgomery County single family home closings actually ended the year slightly lower than 2009. So, even though we have a month of some positive news, let’s be cautious about making assumptions.

housing dataOk, I know you’re going to ask about NAR’s statements about rising home sales. Sure, NAR chief economist, Lawrence Yun, was reported to say that “the housing recovery was underway.” He was also quoted to say, “A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices…”

However, the latest release of the S&P/Case-Shiller Home Price Indices (May 29th; standardandpoors.com) states “that all three headline composites ended the first quarter of 2012 at new post-crisis lows.” Although there was a 1.6% decrease in home prices in the Washington DC metropolitan area in February compared to January, there was a 1% increase in March compared to February; however, prices have decreased 0.6% for the year.

Although media headlines shout that housing has turned a corner, it’s a little premature to assume that the housing market has normalized with only one month’s data. The housing market has turned so many corners in recent years that I think we’ve made several circles! Just as in 2010, let’s see the final tally. There’s still some data to collect; let’s see how the housing market fares through the remainder of the summer.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 28, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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Asbestos can be found in the home

by Dan Krell © 2012
DanKrell.com

wallboardHazardous materials are everywhere – even in some homes. Unfortunately, hazardous materials are often found to be dangerous years after they have been widely used. One such material is asbestos. Building materials containing asbestos are still found in many homes.

The Environmental Protection Agency has a lot to say about asbestos (epa.gov): “Asbestos is a mineral fiber that has been used commonly in a variety of building construction materials for insulation and as a fire-retardant. Because of its fiber strength and heat resistant properties, asbestos has been used for a wide range of manufactured goods, mostly in building materials (roofing shingles, ceiling and floor tiles, paper products, and asbestos cement products)…” Significant health problems can occur “…When asbestos-containing materials are damaged or disturbed by repair, remodeling or demolition activities, microscopic fibers become airborne and can be inhaled into the lungs.”

One building material that is said to contain asbestos is vermiculite insulation. Vermiculite is a mineral that was widely used for attic and wall insulation for many years. Unfortunately, the EPA states that over 70% of the vermiculite sold in the US from 1919 to 1990 originated from a mine that was found to be contaminated with asbestos. If you have vermiculite insulation, the EPA website states that you should assume it contains asbestos.

The EPA says, “The best thing to do is to leave asbestos-containing material that is in good condition alone. If unsure whether or not the material contains asbestos, you may consider hiring a professional asbestos inspector to sample and test the material for you. Before you have your house remodeled, you should find out whether asbestos-containing materials are present. If asbestos-containing material is becoming damaged (i.e., unraveling, frayed, breaking apart) you should immediately isolate the area (keep pets and children away from the area) and refrain from disturbing the material (either by touching it or walking on it). You should then immediately contact an asbestos professional for consultation. It is best to receive an assessment from one firm and any needed abatement from another firm to avoid any conflict of interest. In such a scenario as described above, asbestos-containing material does not necessarily need to be removed, but may rather be repaired by an asbestos professional via encapsulation or enclosure. Removal is often unnecessary.”

homeThe EPA recommends: to keep activities to a minimum in any areas having damaged material that may contain asbestos; take every precaution to avoid damaging asbestos material: all sampling, removal or repair is to be done by professionals trained and qualified in handling asbestos. Additionally, never dust, sweep, or vacuum debris that may contain asbestos; never saw, sand, scrape, or drill holes in asbestos materials; never use abrasive pads or brushes on power strippers to strip wax from asbestos flooring; never sand or try to level asbestos flooring or its backing; never track material that could contain asbestos through the house. The EPA website (epa.gov/asbestos) has a complete list of recommendations and precautions for asbestos and vermiculite insulation.

Additional information and precautions on asbestos in the home can be obtained from the EPA (epa.gov/asbestos) and (for Maryland residents) the Maryland Department of the Environment (www.mde.state.md.us). The EPA and the MDE regulate and license contractors to remove or encapsulate asbestos; the MDE maintains a list of licensed asbestos contractors.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 21, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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