Tag Archives: Gulf coast oil spill

Health Care Tax on Real Estate Sales?

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Maybe you’ve received the e-mail making the rounds these days which states “Under the new health care bill – did you know that all real estate transactions are now subject to a 3.8% sales tax?”  Of course I was alarmed because a tax on real estate would be just one more blow to the economy, as real estate contributes 32% to our nation’s GDP (Gross Domestic Product).  

Upon searching factcheck.org I discovered this is partially true.  According to factcheck.org “Democratic lawmakers decided on a new 3.8 percent tax on the net investment income of high-income persons.”   They go on to write that the law is misleading, and it would be easy to see why anyone reading it would believe the 3.8% tax applies to everyone that sells a home.  So the circulating e-mails may not have been intentionally misleading or malicious. 

Furthermore, the 3.8% tax won’t apply to everyone.  It will apply only to profit on the sale of a home exceeding $250,000 for a single person or $500,000 for a married couple filing jointly. There are some minimum income requirements too. The tax is not scheduled to go into effect until 2013, after the next election.  We are not tax professionals, so we encourage everyone to consult with their own tax advisor. 

It appears that Congress and the President have snuck in additional capital gains taxes on real estate.  It is easy to see why this fact has not been advertised because it is not very popular with Americans right now.

Home Prices Slip

 

Median home prices are up over 9% from last year, but they did take a step back in May, down 4.53% from April’s numbers.  The median sales price of a home stands at $96,900, down from $101,500 a month earlier but up from $87,900 last year.  Home sales remained strong in April with 1,460 sales in May, which was up over last year’s 1,417 number. 

Fort Myers & Cape Coral Florida Median Home Sale Prices 2009-2010 - SW Florida Real Estate
Median Home Sale Prices Lee County Florida

We have noticed a drop in pending sales in June. We know that many sales have been delayed or fallen out due to the flood insurance expiration.  Congress has not renewed the National Flood Insurance Program, so essentially it’s impossible to get a mortgage on properties that require flood insurance.  One tactic people are using is buyers assuming the sellers existing flood insurance, if it exists.  You cannot do this with hazard insurance, but it can be done with flood insurance. 

We’ll keep a close eye on the SW Florida real estate market going forward.  Oil has not hit here, and as we wrote last week, there are scientific reasons why it may not ever.  We have lost one sale from a buyer who definitely wanted to buy a waterfront home but is waiting to see what happens with the oil spill.  Between the oil, flood insurance, tax hikes, expiration of tax credits, and the like we’d hope that our government would be more proactive in stimulating real estate activity, because we know real estate sales stimulate the economy.  At the very least, renew the flood insurance program and eliminate tax hikes on sales so people who want to purchase can again.

Uncharted Waters

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Seems like the topic of the day is what’s up with the oil slick and how will it affect us?  The answer is it could affect us in three ways:  Environmentally, Economically, and Politically. 

We’ll leave the political arguments to the experts on TV.  Environmentally people realize how it could affect beaches, sensitive estuaries, fish, and the like.  Economically this could have a ripple effect on boat captains, restaurants, tourism, and ultimately real estate. 

Oil Spills Effect on Florida Real Estate
Gulf Coast Oil Spill's Effect on Real Estate in Florida

We should not put our heads in the sand and pretend like it doesn’t exist, but I think too many people are suffering from FEAR (False Expectations Appearing Real)  Many times the potential of what could be is far worse than anything that actually happens. 

Here are a few real estate examples.  I remember on two occasions a church was proposed that backed up to a subdivision.  All sales stopped for homes that backed up to the potential church.  Potential buyers looked at a future church as a commercial albatross or something and were afraid to buy for FEAR values would go down after they buy it. 

In both of these subdivisions where the church went in, sales resumed immediately after buyers saw what was.  They feared what could be and shutoff, but once erected they could deal with what was.  

Remember back to Hurricane Charley in 2004?  Charley put SW Florida on the map, and many feared the bad publicity about hurricanes would mean nobody would buy here again.  I guess the old saying “There’s no such thing as bad publicity” is true, because people flocked here in droves looking for property in 2004.  In 2005 it seemed we had a hurricane every weekend somewhere in the vicinity, and it didn’t stop people from buying.  What ultimately doomed SW Florida real estate in 2005 wasn’t hurricane related at all, it was a man-made financial crisis.  The whole point I’m trying to illustrate is that what people feared didn’t hurt us at all, and in fact even the bad publicity seemed to help.  It drew attention to our area. 

The jury is still out on what will happen with the oil.  After a slow start, it appears that the government along with BP is pulling out all stops to break it up.  There’s a chance the oil could go some places and not others.  I am certain that local Chamber of Commerce departments are gearing up ad campaigns depending on what happens.  If the oil doesn’t come here, you could just imagine all the tourists who were supposed to visit Biloxi MS, Destin, etc. coming here instead.  And this scenario could play out up and down the coast depending on the oil. 

If the oil does come here, we know the government will employ a massive cleanup effort and things will look fine.  I worry more about the wildlife and the unseen effects more than waterfront prices and real estate.  I think our real estate will be just fine.  What may not be fine are businesses that rely on fishing and tourism in the short term. 

It is for this reason we must all join together and do whatever we can like they are doing now in Louisiana.  Let’s do what we can to protect our environment, our beaches, our seafood, and our way of life.  The more we do for our environment, the less effect it will have economically and politically.  Let’s turn this disaster into something positive.  Let’s increase regulations and add protections to minimize this happening again.  Too many people and wildlife depend on a clean environment. 

Real estate will be just fine.  If the oil comes, FEAR may affect us in the short term, but real estate will recover.  Let’s hope the same can be said for our environment and people who depend on clean waters.