CHARLOTTE METRO REAL ESTATE TRENDS AND STATS

Five Questions to Ask
Before Remodeling

NEW YORK -- Spending on remodeling is expected to reach $316 billion this year alone and the number is still climbing, according to the Home Improvement Research Institute. So make sure you know exactly how big a renovation you can afford and whether it justifies the time you intend to spend in your revamped home.

The Nest, a home-improvement Web site, says before making any big changes to your home you should ask yourself these big questions:

1. How long do I plan to stay in my house after the renovations? The longer you plan to live there, the more creative you can be. But if you're planning on selling the house in the next five years, keep potential buyers in mind with your choices. In the latter case, for instance, go with neutral colors in the kitchen and bathroom, and consider maple cabinets. Some people hate oak, others hate cherry, but the majority can live with maple.
   
   
2. Am I doing just cosmetic fixes or am I ready for an all-out overhaul? It's OK to make small changes one at a time, but think long-term about the next step. For example, if you're buying a new sink, buy one with enough holes on the deck for the faucet, sprayer and soap dispenser you might want to add on later. (Cutting more holes into stainless steel or porcelain after the sink is installed is an onerous job you don't want to get stuck with.) And if you know you're going to buy new cabinets later, don't replace the countertop with expensive granite now. The chances of reusing it are very slim -- either it breaks when you try to remove it, or it doesn't match the footprint of the new cabinets.
   
   
3. Am I prepared for the home upheaval? Be realistic about how long these changes might take. Renovations can go on for months, so you need to be prepared to make do without that bathroom, kitchen or bedroom. When checking references before you hire your contractor, be sure to ask if the company finished the work on time. You'd be surprised how quickly a week can turn into a month. And if you're bunking up with your in-laws during renovation, that month can seem like a year.
   
   
4. Are the renovations keeping with the style of my home? Any big changes you make to a home inside should reflect what future buyers will expect from the outside. If you live in a Victorian house, don't make it too contemporary. People who see a historical exterior will expect a historical interior, so stay true to the details. The same goes for a contemporary or modern home, where future buyers may not expect old-fashioned details like antique crown molding.
   
   
5. Are my DIY choices reasonable? You may consider yourself handy, but many do-it-yourself jobs demand your time more than anything else. If you have a full-time job, are you capable of taking on a second one? Some makeovers that are not technically difficult can take longer than you think. For that reason, if you start any job yourself, try to sample it before committing to the whole thing. For example, while refinishing cabinets with a new stain isn't rocket science, sanding down each one can take forever.

A final tip: if you do plan to follow through with a large-scale renovation, do the smallest room in the house from start to finish -- the insulating, rewiring, painting, refinishing, tiling -- so you gain a sense of accomplishment.

North Carolina is the second-best state in which to conduct business, according to Chief Executive magazine.
The magazine evaluates states on natural resources, regulation, tax policies, quality of living, education and infrastructure, among others. North Carolina ranked No. 3 last year.
The state’s best asset is its work force, the magazine says. Chief Executive ranked North Carolina’s work force as third-best in the country.
Other areas of strength included access to capital (No. 10), business friendliness (No. 10), transportation (No. 15) and technology and innovation (No. 18).
Texas maintained its ranking of first on the list, which was based on surveys of more than 500 chief executives. The magazine says states that perform well in the rankings tend to have lower taxes and little unionization.
California and New York were ranked the worst and the second worst, respectively.

Source: Charlotte Business Journal

Mortgage bond prices rose last week applying downward pressure on mortgage interest rates. The bond market got a boost from the Fed announcement (read below) to buy more mortgage debt. There was some profit taking in bonds Thursday afternoon following the run-up in prices Wednesday. Higher than expected core readings of the consumer and producer price indices reignited some inflation concerns. The Fed's continued efforts to pump money into mortgage bonds helped keep mortgage interest rates favorable. For the week, interest rates on government and conventional loans fell by about 1/2 of a discount point.

The Treasury auctions will once again take center stage this week as additional debt supply hits the market. Durable goods orders and consumer sentiment data will be important.

Additional Fed Money

Last week the Federal Reserve announced it would pump another $750 billion into purchasing more mortgage-backed securities, the bonds that directly dictate 30 year and 15 year fixed rate Government and Conventional mortgage interest rates. This is in addition to the $500 billion being used between January and June to drive mortgage interest rates lower and help stimulate the economy.

So far the Fed has been able to keep mortgage interest rates relatively low while not destroying the functioning secondary market where investors buy and sell mortgage bonds. The potential negative is that the Fed has become the primary purchaser of these bonds. In the short term take advantage of these advantageous rates. There is uncertainty how things will play out once the Fed begins to unwind those positions in the future.

Reminder of Requirements if You Close Late in the Year

If you closed on your exchange relinquished property in the year 2008, you must report the completed exchange on IRS Form 8824, Like Kind Exchanges, as part of your normal 2008 tax return. For those who closed on their relinquished property after October 20, 2008, and have not completed their exchange, the end of the 180-day exchange period can be no later than April 15, 2009, unless you file an on-time extension. To get the automatic six-month extension, you must file the simple IRS Form 4868 prior to April 15, 2009.

Do You Claim a Mileage Write-Off to Check on Your Rental Property?

You can deduct ordinary and necessary travel expenses related to your rental activities, including 50% of meal expenses incurred while traveling away from home. Starting January 1, 2009, the IRS standard mileage rate is fifty-five cents (55 cents) per mile. Last year's Form 1040, Schedule E, instructions stated you can use the standard mileage rate only if you used the standard rate for the first year the vehicle was placed in service or the entire lease period. Also, include on Line 6 of the Schedule E all parking fees encountered. You must also complete Part V of Form 4562. See the instructions for Line 6, Schedule E, for more details on claiming mileage deductions. This is an expense that should not be overlooked.

IRS Private Letter Ruling 200901020

In a little known private letter ruling, the IRS clarified that existing residential development rights to be transferred by an exchangor as relinquished property were of like-kind to a fee interest in real estate, a leasehold interest in real estate with over 30 years remaining, and land use rights for hotel units on land the exchangor already owns. Under the state law the development rights were also an interest in real property.

Fannie Mae Changes Four Unit Restriction

At the urging of the National Association of REALTORS®, Fannie Mae will, as of March 1, 2009, fund condo units for investors who have financing on over four properties. They will now provide financing for investors who have mortgages on up to ten properties. Fannie Mae also raised investor loan-to-value ratios and did impose a number of investor tests including documentation of all rental income, two years worth of federal tax returns, strict bank reserve requirements and no bankruptcy or foreclosures in the past seven years. As Columnist Ken Harney has said, Fannie Mae is looking to deal only with the financially stable multi-unit investors. Yet this overall policy change will let those who qualify to at least get Fannie Mae loans instead of the hard-to-get high priced loans from other sources.

This change is in addition to Fannie Mae's earlier change that it will no longer count vacant, bank foreclosed and bank real estate owned units as non-owner occupied. Investors or home buyers often were stopped from getting financing and buying in a condo complex because of the way Fannie Mae counted units. However, they also announced rules not to fund mortgages in a condo complex if more than 20% of the space is not residential, a single entity owns more than 10% of the total units, or if they consider the sales and finance being offered by the developers or owners to be excessive.

2009 Stimulus Bill H.R. 1

Many organizations and lobbyists have been actively tracking and have influenced the stimulus bill. Particularly, the National Association of REALTORS® (NAR) tried to insure certain items were added and that gains made over years were protected. Of special interest was a tax credit for first-time home buyers. This is defined as those who have not been homeowners in the past three years. According to Mr. Charles McMillan, the 2009 President of NAR, the tax credit with no payback (not a loan) will be $8,000. This credit is in fact 10% of the purchase price up to the $8,000. This is for the purchase of a principal residence by first-time home buyers from January 1, 2009, to December 1, 2009. To qualify your family income may not exceed $150,000 if filing jointly. For a single taxpayer the income should not exceed $75,000. The credit will be forfeited if the house is sold within three years. Mr. Lawrence Yun, NAR Chief Economist, says the $8,000 tax credit should boost home sales by 300,000 for first-time home buyers. If the $8,000 tax credit is greater than the tax you paid, then you will get a refund check for the difference.

Also, the Bill has $50 billion for foreclosure mitigation. As he said, NAR preserved what we already had, including mortgage interest and real estate tax deductibility and the $250,000/$500,000 capital gains exclusion on principal residence sales (IRC Section 121). Also there was no change in the IRC 1031 Like Kind Exchange regulations. With quick effort real estate agents can increase sales to qualified home buyers and thus increase the sale of relinquished properties for exchangors ready to invest in a replacement property.

YTD Activity Report: 1/1/2009 through 2/28/2009

Property Type: Single Family

Rocky Mount, NC                        2.19%     6.84%     17.02%