First gain for Calif. prices in 16 months

Here's the Leading News item: 

The median price for an existing, single-family home in California rose 1.6 percent in March compared with the year before, marking the first year-over-year increase in 16 months, the CALIFORNIA ASSOCIATION OF REALTORS® reported Monday.

Making sense of the story

• The statewide median price of an existing, single-family detached home jumped 9.2 percent to $291,080 in March from February’s $266,660 median price and was up 1.6 percent from a revised $286,550 recorded in March 2011.  The month-to-month increase was the largest since March 2004.
• Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 505,360 units in March, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  Sales in March were down 4.5 percent month-over-month and 2.3 percent year-to-year.
• The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the March pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.
• “Housing inventory remains extremely tight throughout the state and at levels severely under normal market conditions,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “In areas, such as Los Angeles and Riverside counties, where the Federal Housing Finance Agency (FHFA) wants to implement the REO bulk sale pilot program, inventory is running at levels well below the long-run average.  These low inventory levels demonstrate that the pilot program is not necessary in California.”
• The pilot program calls for the sale of more than 600 Fannie Mae-owned foreclosed homes in Los Angeles and Riverside counties to institutional investors.

Here's the whole story...

Mitt Romney Eyes Mortgage-Interest Deduction

By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.
Throughout the economic downturn and recovery, we've seen the topic of the mortgage-interest deduction come up time and again. It's fitting that Republican presidential candidate Mitt Romney would bring it up this week as millions of Americans are frantically filing income taxes to avoid being late.

In a speech on Sunday, Romney said he's considering eliminating the mortgage-interest deduction for second homes for high-income individuals. This often comes up with politicians and congressional groups as a viable option for creating more revenue for the federal government.

Let's first look at the number of homes and owners this might affect. The National Association of Realtors estimates that second homes – including vacation and investment properties – accounted for 38% of home sales in 2011. The group said that about half a million vacation homes and 1.2 million investment properties were sold last year, continuing a trend in which these homes have accounted for the largest chunk of sales since 2005.

Generally speaking, eliminating or making changes to the mortgage-interest deduction is not going to have a great impact on the housing market. While the government may reap some rewards in the form of more cash made via taxation, most homeowners and first-time buyers still see the deduction as an important perk or benefit of owning a home. Messing with this deduction now at a time when the recovery is still quite fragile and slow would be a bad idea.

Eliminating or scaling back the mortgage-interest deduction would hit states in which vacation homes are most popular harder than others. Florida, Maine, Michigan and Colorado could see fewer sales as a result.

Moreover, more buyers have been jumping in the market and buying investment properties in recent years. Sales of investment properties spiked 64% last year. These are properties that otherwise may not have been purchased, which makes a pretty big case for keeping all incentives in place for investors to continue buying, and therefore aiding the housing recovery along.

While some say that the mortgage-interest deduction isn't as big a deal for second home buyers because of the emotional nature of those purchases, I'm leery of mucking up a homeownership perk that's long been held as a great benefit to owning a home. If incentives like this are working to keep investors hungry for real estate – and that hunger in turn is helping the market as a whole – then let's back off and find another way to fix our fiscal mess.