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The Cost Of Purchasing A Home In The U.S. Increased 55% Last Year. But It’s Still A Great Time To Buy A House For These Five Reasons

May 31, 2022 by Amy Leave a Comment

I’ve always been all-in on homeownership. Yet, for the first time in two decades since the beginning of the pandemic, I haven’t owned a home.

All of which got me thinking: The National Association of Realtors (NAR) just issued a report calculating that the cost of purchasing a house in the U.S. has increased 55% year over year since 2021 after factoring in home value appreciation, tax re-assessments, and mortgage rate increases.

So, from a seller’s standpoint did I just miss out on the frothiest bull housing market in decades?

Home Sales Increase Slightly As Prices Drop

The pandemically-fueled housing market is breaking records and making homeowners fortunes.

In two senses the answer, unfortunately, is yes.

The pandemically-fueled housing boom since 2020 as a function of appreciation over time is unprecedented against any other historical financial metric, including the recent Dow Jones, NASDAQ, and S&P run ups.

That percentage gain also translates directly into higher appraised home values, which means more equity in sellers’ pockets when they decide it’s time to move. Ergo in sum, homeowners have seen a better return on their real estate investments over a shorter period of time since 2020 than even the pre-Great Recession housing bubble.

The good news for people like me who’ve either rented by choice, been priced out of the current market by the math, or sat on the real estate sidelines for other personal reasons over the past two years, however, is that now is still a great time to buy a home for several reasons under the right circumstances.

UK Daily Life 2021

It’s no longer just a seller’s market.

First and foremost, the COVID housing froth finally is cooling off.

Listings are up along with new housing starts, closings are down, and the days of all cash, waive-all-contingencies bidding wars are waning. So, excluding places like San Francisco or Manhattan where home prices had reached the point of almost stupid years ago, buyers in most markets already are on the back side of the pandemic peak.

“The overheated market of 2021 is already transitioning toward a less frantic landscape in response to several factors, and housing’s fundamentals are already shifting from the early days of the pandemic,” says George Ratiu, Manager of Economic Research at Realtor.com. “Builders have ramped up the pace of construction and more new homes are hitting the market. In addition, many homeowners who delayed their plans during the pandemic are ready to move forward with their lives so we’re already seeing an increase in the number of new listings—a sign of improving supply in existing homes. This boost in inventory, coupled with higher mortgage rates, inevitably is going to put downward pressure on the frenetic price growth we have experienced over the past year. That’s good news for buyers who have time on their side since the real estate landscape over the next 8-12 months is likely to shift away from a seller’s only market.”

The 25-44 year old population is up about 50% in the past decade in the Logan Circle/Shaw neighborhoods.

Millennials are now the largest demographic cohort in the U.S. and the largest pool of potential.

Many would-be home buyers, especially Millennials without kids, also have been stashing cash in lieu of eating out and taking vacations since the beginning of the pandemic, resulting in a COVID-induced nest egg alternatively deployable for down payments, closing costs, moving, and renovations—which often are the primary financial impediments to purchasing a home in the first place.

Perhaps most importantly, almost every expert I’ve spoken with agrees that the current housing boom isn’t a “bubble” a la 2007. Housing’s core fundamentals are strong—meaning the basics of supply and demand as well as the mortgages and household balance sheets upon which those foundations are based aren’t about to shatter from a glass house rock out of nowhere any time soon.

Here are five other specific reasons why now is a great time to buy a home.
Lake Boca Raton and city skyline with reflections at sunset

Housing prices aren’t going down any time soon especially in places like South Florida.

Prices Aren’t Going Down

No matter who you talk to, it’s widely agreed that U.S. home values across the board aren’t dropping any time soon. This is due primarily to a single-family housing supply crisis and demographic shifts that have been building for years. So even while homes prices might seem inflated right now by the numbers, they aren’t artificially elevated like they were back in in 2005.

“A couple of factors are likely to keep pressure on prices for the foreseeable future,” says Realtor.com’s Ratiu. “The first one is demographics. Millennials are the largest cohort in the U.S., are embracing homeownership, and eager to use real estate as a foundation for financial and economic growth. With over 4.5 million Millennials turning 30 over the next few years, housing demand will remain robust. At the same time, we started 2022 in the wake of over a decade of under-building. Based on Realtor.com’s calculations, we are short 5.8 million new single-family homes across the country which will sustain demand and prices.”

That means buying a home now is still a solid, low risk money parking strategy, especially when the non-financial benefits of homeownership are taken into account like being the master of your destiny instead of a landlord’s and being able to renovate or build an addition if you end up working from home for the rest of your life.
Federal Reserve Board Chairman Jerome Powell Speaks At ″Fed Listens″ Event

Despite the Federal Reserve’s recent interest rate hikes residential mortgage rates are still 

Mortgage Rates

In 1981, interest rate hikes by the Federal Reserve to put the breaks on inflation pushed 30-year fixed mortgage rates to an all-time high of 18.63%. So, despite the Federal Reserve’s recent monetary tightening and interest rate increases (the current 30-year mortgage rate according to Bankrate is 5.46%)—and the possibility of subsequent ones to come later this year—mortgage interest rates overall remain historically low.

While the days of crazy cheap money are temporarily over and paying down a typical mortgage has jumped by $633/month for a median priced home, the historical price of entry to purchase a house in the U.S. is still lower than it’s been on average for the past 50 years.
New Home Construction At The Highest Level In 17 Years

The mortgage interest tax deduction is still one of the best financial benefits of homeownership. 

Taxes

For first time homebuyers who’ve been renting for years, homeownership comes with a ton of perks.

One of the more mundane yet financially profound of them is the mortgage income tax deduction, which the National Association of Realtors has masterfully lobbied to keep in the U.S. tax code for decades. This allows for up to 100% of the interest you pay on your mortgage to be deducted from your gross income in addition to the other deductions for which you are eligible like the standard personal deduction and deducting for home office expenses before your final tax liability in any given year is calculated.

Depending on the price of your home and the size of your mortgage, these aren’t small numbers, especially as interest rates rise. Some years in some houses, particularly in 2005 when I bought a home at an 8%+ rate, my mortgage interest deduction was well into the $20,000 range—which for a writer is no small nut to be able to write down off of my total earned income (in some years the mortgage interest deduction alone brought me down into an entirely different tax bracket).

In addition, after two years the profits from selling your house assuming it’s your primary residence aren’t taxed by capital gains which means more net money into your pocket after closing costs.

Rents Are Increasing Too

The pandemically-fueled home price increases in the U.S. over the past two years have been widely reported in the media, yet far less covered has been the fact that residential rents have been rising too. Rents in Boise, ID, for example, have increased over 13% since the beginning of the pandemic, almost double that of inflation as a whole. In Miami according to some estimates they’re up over 31%.

So for home buyers weighing the opportunity costs of continuing to rent and throwing their money away versus getting into the homeownership game and building long-term wealth, the logic isn’t as clear as it’s been in the past when rents typically have dropped asymmetrically relative to home price increases in a similar fashion to investors fleeing stock markets in favor of government backed bonds.

Landlords, and the rent increases they impose, also aren’t tied to the federal funds rate like banks and mortgage lenders, so when it comes to owning a home there’s at least some certainty that homeownership inflation will remain linked long-term to well-intended monetary policy rather than the whims of Wall Street and private equity firms.
Bay Area Feels The Effects Of Plunging Housing Market

Real estate is still one of the best wealth building strategies long term. 

Wealth Building

No matter how you slice the numbers, long-term homeownership is still one of the most predictable, risk-manageable wealth building strategies compared with other ways of deploying one’s income for a return on investment. So compared with renting, even at today’s 5.46% mortgage rates, building equity in a house instead of renting is still a hard logic to argue with—especially if home prices remain strong.

“Inflation and its upward pressure on price levels is less like the tide and more akin to climate change and the impact it has had on rising ocean levels,” says Realtor.com’s Ratiu. “Once prices reach a higher watermark, they are likely to only move up from there. Consider that in 1972, the median value of a new home in the U.S. was $29,200. By 1992, median price reached $126,000, and it further advanced to $190,100 in 2002. During the mid-2000s housing boom, median prices peaked at $257,400. The housing bust of 2008 saw median new home values decline to $208,400. However, the ensuing recovery pushed prices to $327,100 by the fourth quarter of 2019, and the shift brought about by the pandemic only accelerated the trajectory. Based on Census data, the first quarter of 2022 saw median prices above $428,000 for new homes. Meanwhile, hampered by a significant shortage of supply, median prices for existing homes also reached new records, hitting $425,000. While the historical values are not adjusted for inflation, housing remains one of the most predictable ways to build wealth over time.”
Celebs' mansions in Miami, United States on February 09, 2001.

Real estate—still a safe bet. Especially in markets like Miami. 

What all of this means for the U.S. housing market writ large is good news, says Craig Studnicky, founder of Miami-based real estate brokerage RelatedISG.

“The pandemic set off a worldwide frenzy for single-family homes. In the early days of COVID, people started to realize that it was easier to manage social distancing in a house where you typically have more space and you didn’t have to share an elevator or lobby with your neighbors. People then discovered the joy of owning a house because of the space and privacy it offers. In addition, suddenly people could work remotely and had the freedom to live anywhere, so they wanted to move to places like South Florida where the weather is great all year round. Mortgage rates also hit historic lows which helped accelerate the home buying frenzy, especially as the Millennial generation became of homebuying age. Demand quickly started to outstrip supply, sending prices spiraling. And historically when prices go up to these levels, they rarely come down and the widespread housing supply shock we’re currently experiencing won’t be resolved anywhere overnight. Houses have become a gold standard for investments and that’s not changing anytime soon on Wall Street or Main Street.”
By:
Peter Lane Taylor

Filed Under: Eastside Real Estate Blog, Issaquah Community Blog Tagged With: Home Buying, Home Prices, homeownership, Housing Market, Mortgage Rates, Taxes

How to Buy a Home When Mortgage Rates Are Rising

March 12, 2018 by Kathy Reichle Leave a Comment

Mortgage rates have risen about half a percentage point since September. What does that mean for you if you’re buying a home now or plan to buy one soon?

For starters, don’t panic.

When you’re buying a home, the mortgage rate matters, but it shouldn’t monopolize your attention, says Robert Frick, corporate economist for Navy Federal Credit Union. “You shouldn’t focus on the rate and let that scare you into making a hasty decision about buying a house,” he says.

How rising rates affect your monthly payment

The average rate on the 30-year fixed-rate mortgage rose to 4.54% on Feb. 16, 2018, according to NerdWallet’s daily rate survey. It averaged 3.99% on Sept. 26, 2017 — meaning it has gone up more than half a percentage point in less than five months.

While a half-point increase doesn’t have a major impact on the monthly payment, the added cost does add up over time. On a 30-year loan for $200,000, the monthly payment would be nearly $59 more at a 4.5% interest rate than at a 4% interest rate. That adds up to more than $21,000 over 30 years.

What to do when rates rise

Mortgage rate fluctuations have been catching home buyers off guard for generations. Your forebears have developed tried-and-true strategies to cope with rising rates. Here are some things you can do when mortgage rates trend higher:

No. 1: Lock your mortgage rate. With a mortgage rate lock, the lender promises a defined combo of interest rate and points. If you close the home loan by the specified date, the rate can’t go up. You can use this tactic after the lender has approved you for a mortgage for a specific house. Some lenders offer a one-time “float down” option allowing you to secure a lower interest rate if rates go down; this option is more common for construction loans and long-term rate locks.

No. 2: Buy “points” to reduce the interest rate. If you have the cash, you can pay for discount points — in effect, prepaying some of the interest in exchange for a lower mortgage rate. One point equals 1% of the loan amount. The discount you get for one point varies as mortgage rates fluctuate. But as a rule of thumb, paying one point often gives a rate cut of one-quarter of a percentage point.

No. 3: Revise your price range. A higher mortgage rate brings higher monthly payments. When you begin your home search, determine a range of interest rates that will still allow you to afford the type of home you want without stretching your budget past the point of reason. Or, rising rates might force you to adjust your home-price range downward. Start with this loan affordability calculator and click “Edit rate” on the right side.

Why rates are rising now

This recent rise in mortgage rates arrived in two stages:

  • The first happened in the weeks after the passage of tax reform in late December
  • The second happened Feb. 2, 2018, when the January employment report indicated that hourly wages had risen 2.9% compared with 12 months before

The tax cuts and the wage report were both regarded as inflationary, because when people have more money in their pockets, they tend to spend it, driving up prices. (Classic supply and demand.) And higher inflation tends to bring higher interest rates for everything, including mortgages.

On top of that, futures traders expect the Federal Reserve to raise short-term interest rates at least two, if not three, times this year, which could exert upward pressure on long-term mortgage rates.

Frick says businesses and governments around the world are ramping up their borrowing. As they compete with one another to borrow money, they bid up interest rates. This upward pressure trickles down to consumers, who end up paying higher interest rates for everything from credit cards to mortgages.

Are higher rates the ‘new normal’?

Talk to any housing economist about mortgage rates, and you’ll hear that rates have been abnormally low in the decade since the housing crash.

“I remember in the mid-’90s, getting a 7% rate, being happy with that,” says Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research. “The rates we’re looking at today are still, by any measure, pretty low. So it’s basically the economy getting back closer to normal.”

Frick says: “People have gotten kind of lulled into these low rates, and a lot of people think this is normal, but this is not normal. We’re returning to normal, and that’s still going to be a painful process because we’ve gotten used to low rates.”

HOLDEN LEWIS

Filed Under: Eastside Real Estate Blog, Finances, First Time Homeowner, Homeownership, Issaquah Real Estate, Larry and Kathy Reichle Tagged With: Finances, Home ownership, Interest Rates, monthly payment, Taxes

Why You Should Sell Your Home in 2018

January 29, 2018 by Kathy Reichle Leave a Comment

 

 

If you haven’t given much thought to selling your home this year, you might want to think again.

Real estate information company Trulia commissioned a survey of more than 2,000 U.S. adults, conducted by Harris Poll, to get a feel for expectations and plans for housing and homeownership in 2018. The survey results show 31 percent of respondents expect 2018 to be a better year for selling a home than 2017 – and just 14 percent expect it to be worse.

Despite the enthusiasm, only 6 percent of homeowners surveyed plan to sell their home in 2018.

Real estate information company Zillow echoes these sentiments in its predictions for 2018, expecting inventory shortages to continue to drive the housing market. With too few homes on the market to meet buyer demand, prices increase and would-be buyers can’t afford the price or down payment needed to submit a winning offer.

If you’re a homeowner and have been thinking about selling, what are you waiting for? You may not consider 2018 to be your year to sell, but here are four reasons why selling in the next 12 months could be more beneficial than you think.


Buyers are chomping at the bit. Eager homebuyers have been frustrated over the last few years, experiencing low inventory in most major markets, which is pushing them to start home shopping earlier in the year to try to beat out the competition and ensure they’re not missing out on any available properties.

Even before the clock struck midnight on New Year’s, people were already getting a head start on looking at buying or selling a home in 2018. Real estate information company HomeLight saw a 25 percent traffic spike on its website on Dec. 26, with continued high rates of traffic through the first part of the new year.

“Folks have generally turned their attention away from the holiday and time with family and friends, and moved onto the new year and what they want to accomplish,” says Sumant Sridharan, chief operating officer of HomeLight. “And for many people, that tends to be where they want to live.”

The best time to sell your home is traditionally between March and June, Sridharan notes, while warmer climates may see a longer time frame because they’re not restricted by weather. But cold weather isn’t keeping interested buyers from starting their home search at the start of the year. The fact that buyers take the day after a major holiday to start looking for new home means the traditional selling season could be even hotter.

And while the last couple years have proven beneficial for sellers, seeing many homes sell for asking price or above, it won’t last forever. Zillow predicts home builders will begin looking to construct more entry-level homes to meet demand later this year. If you wait too long to put your home on the market, you may find yourself competing with new builds that haven’t been a part of the market in large numbers since before the recession.

Interest rates are low … for now. For both the buyer of your home and your own next home purchase, low interest rates can help make a transaction possible. In the second week of January, the average interest rate for a 30-year fixed-rate mortgage was 4.17 percent, according to NerdWallet. Mortgage rate averages reached more than 4.4 percent in 2017, but closed the year out just below the current rate.

While mortgage rates aren’t expected to spike significantly this year, they are forecast to increase overall. The Mortgage Bankers Association predicts 30-year fixed-rate mortgages will rise to 4.6 percent this year, and it expects rates to rise to 5 percent in 2019 and 5.3 percent in 2020.

While increasing interest rates are a sign of a good economy, they can squeeze out some potential homebuyers from the market. The current low rates can serve as a catalyst for many potential homebuyers to get moving sooner rather than later. But as interest rates continue to rise, you’re less likely to see as many bidding wars – which is welcome news for buyers but not sellers.



You can move to find cheaper property taxes. The passing of the Tax Cuts and Jobs Act at the end of 2017 means a few significant home-related tax policy changes for the 2018 calendar year: Mortgage interest rates are only deductible up to $750,000 in debt and property taxes are only deductible up to $10,000.

While these limits don’t affect all homeowners, people who live in counties and cities with high property taxes are likely to feel the financial hit when they file taxes in 2019. If your household is going to struggle without the deductions you’ve had previously, it might be time to look elsewhere.

“For most of the world, I think it really creates a consideration of where I want to be and how I want to be there,” says Cody Vichinsky, co-founder of Bespoke Real Estate, based in Water Mill, New York.

Vichinsky expects housing markets in coastal states to be most impacted by the tax reform – and more specifically in the counties or towns with high-ranked school districts because their property taxes tend to be higher. While homeowners with school-age children may see the education factor weigh heavier than the financial burden, “You’re going to see an exodus out of these neighborhoods for people who don’t need to be there anymore,” he says.

You certainly shouldn’t have a hurried reaction to a policy change with an asset as large as a house, but also keep in mind that if you’re looking for the maximum price on your home, the longer the new tax law sinks in, the more likely it is to change feelings toward pricier neighborhoods in coastal markets.

“We do expect, potentially, in the longer term there may be lower demand at the higher price points because the tax [incentives] just aren’t there,” Sridharan says.

Renovations today won’t come back in full next year. Zillow’s 2018 predictions include the expectation that most homeowners will focus on renovations and updates this year rather than selling. If you’ve got remodeling on your schedule for the year, be sure it’s an update for you because it’s unlikely that renovations will have a 100 percent return when it comes time to sell.

“You’re going to get one shot at this,” Sridharan says. “Ultimately the additional money you’re going to spend to make your home look amazing is going to be far less than the amount of money [a buyer will pay].”

The key to taking advantage of the seller’s market this year is not taking the tight inventory for granted. Buyers will still expect effort from sellers in preparing a property for sale. While they may be willing to overlook a dated kitchen, it’s the clutter, deferred maintenance and lack of curb appeal that can still kill a deal. If you do decide put your house on the market, take the process seriously, and you’re likely to see ample interest.

By Devon Thorsby

Filed Under: Finances, Hottest housing markets, Issaquah Lifestyle Blog, Issaquah Real Estate, Larry and Kathy Reichle, Mortgage Rates, What's Trending Tagged With: Home Trends, Mortgage Rates, Taxes, Why Sell in 2018

Home prices are set to soar in 2018

January 9, 2018 by Kathy Reichle Leave a Comment

 

The temperature may be frigid across much of the nation, yet home prices are sizzling and sellers are in the hot seat.

Sales prices jumped 7 percent annually in November, according to a new report from CoreLogic.

That is the third straight month at that pace, far higher than the price gains in the first half of 2017. Low supply and high demand are fueling the spurt and neither of those is expected to ease up anytime soon.

Supply is actually falling even more now, and a strengthening economy is pushing demand. This will have potential buyers out early this year, trying to get a jump on the spring market.

“Rising home prices are good news for home sellers, but add to the challenges that home buyers face,” said Frank Nothaft, chief economist at CoreLogic, in the report. Nothaft said the limited supply is the worst at the lower end, and will hit the growing number of first-time buyers hardest.

Half the homes are overvalued

The largest metropolitan areas are seeing the biggest gains.

In the nation’s top 50 markets, half of the housing stock is now considered overvalued, based on market fundamentals, like income and employment. CoreLogic defines an overvalued housing market as one in which home prices are at least 10 percent higher than the long-term, sustainable level.

Las Vegas led the November report as not only being overvalued, but showing a double-digit annual price gain of 11 percent.

Real estate trends for 2018: What to expect from the housing market

San Francisco was not far behind at 9 percent, and Denver came in third at 8 percent.

Las Vegas and Denver are both considered overvalued, but San Francisco is not, as incomes in the tech capital far exceed the national level.

Of the nation’s 10 major markets with the biggest price gains, seven are overvalued. These include Washington, D.C., Houston and Miami. Boston and Chicago are still seeing price gains but are considered at value.

Without a significant jump in home construction, prices will remain high and likely move higher. Mortgage rates could also move slightly higher, and new tax policy limiting mortgage and property tax deductions, is hitting homeowners in some states hard.

All will combine to make housing less and less affordable in the new year.

Diana Olick CNBC Real Estate Reporter

Filed Under: Homeownership, Hottest housing markets, Larry and Kathy Reichle, Real Estate Investments, What's Trending Tagged With: Finances, Taxes, Trending Topics, U.S. housing investment

Pay Attention in 2018!

January 5, 2018 by Kathy Reichle Leave a Comment

 

We may have a tricky year ahead of us, so what’s the best and easiest strategy for consistent success in 2018?

Pay Attention!

Start the year with or without New Year’s Resolutions, but commit to success this year by paying attention:

#1. To how well informed you and information sources you rely on are

#2. To what’s really going on around you — real and fake, and

#3. To how you react to what’s going on around you — online and off.

Whether you are a real estate owner or a wanna-be… whether you intend to buy or sell in 2018, so much is shifting in real estate, in the economy, and everywhere else that nothing should be taken for granted or assumed in 2018. Concentrate on getting the facts not just someone else’s bias view of where advantages lie for you.

#1. A lot changed in 2017 and the full implications of those changes will continue to emerge in 2018.

Pay attention to ramifications and compromises, subtle and otherwise, attached to changes in everything from tax law and net neutrality to technology’s continued re-write and disruption of much we’ve take for granted:

  • Real estate ownership will be impacted by changes to tax law, estate planning, resulting neighborhood development, and interactions between these and many more elements. Where will advantages lie for you?
  • Changes in the business world may directly or indirectly influence job or retirement security for your family. This in turn may impact qualification for financing, mortgage renewal, and real estate affordability. Projected reductions in funding and donations for social and community support programs and organizations may have widespread impact in neighborhoods, community development, and in education. These shifts may reduce location benefits which, in turn, can affect real estate value. How will your location be affected in 2018?

#2. Whoever or whatever you blamed for distractions in 2017 will be with you in 2018 and might even be worse.

There are only so many hours in the day and only so many dollars in your pay check. Distractions that erode concentration on your needs and goals, and distractions that feed impulse spending will be expensive in many ways. Pay attention to what takes you off point, off track, and off goal to ensure you stay in control. You may blame others for distracting you, but it’s your powers of concentration that should be continually honed and improved to keep you ahead of the pack.

  • Saving for a down payment, home renovation, or to pay down an existing mortgage requires a written budget strategy to guide you toward clearly-defined results.
  • Paying monthly condominium fees, mortgage payments, or heating bills is exhausting when approached as month-to-month catch-up. Shift your focus to cutting costs and increasing income long-term and you’ll move beyond a monthly survival perspective to establish a constructive, long-term frame of reference for success.
  • Steady, dramatic increases in online shopping over the 2017 holiday season mean many households may be combining the impulse spending facilitated by credit cards and click-here shopping carts to undermine their budgets even more dramatically than ever. As the volume of online shoppers increases, convenience, cost saving, and product satisfaction may be compromised, so it’s only the novelty of online shopping that addicts. What’s all this got to do with achieving your core real estate ownership goals?

#3. Significant amounts of what you believed you knew in 2017 about real estate, finance, insurance, home security, mortgages, work, and the internet will be out of date in 2018.

Pay attention to which laws, regulations, services, and real estate expenses have actually changed not just been endlessly, sensationally rehashed in the media and online. Accurate information and clever strategies are gold.

  • Tweets, posts, and other online content arrive in increasingly-overwhelming rates and volumes. This leaves less and less time to uncover facts and realities and to actually learn and think about relevance to you. From shopping or applying for a mortgage to searching for a new home or viewing property, virtual video and online content bring these and other real estate activities onto your laptop and your mobile phone. Is this distance-learning leaving you better informed and smarter real estate-wise than face-to-face meetings with real estate experts and hands-on location and property investigations?
  • Searching out professionals who keep up with change within their profession is a challenge. Time pressures leave some professionals parroting what they hear and see in media and online instead of carrying out thorough research themselves. How do you make sure you receive the professional advice you need to interpret changes from your real estate point of view?

Let’s meet the challenges and opportunities of 2018 head on!

 

Filed Under: A Positive life, Eastside Real Estate Blog, Education, Finances, Financial Planner, New Year Resolutions Tagged With: Home ownership, Mortgage Rates, Saving Money, Taxes

Should You File Your Taxes Early?

March 16, 2017 by Kathy Reichle Leave a Comment

There are plenty of good reasons to file your taxes ahead of schedule. Here are just a few.

Though taxes are typically due on the 15th of April, this year, you’ll get an extra three days to submit your return. The reason? Any time April 15 falls on a weekend, the tax deadline is pushed to the following Monday, but because Monday, April 17, is Emancipation Day (a D.C. holiday), filers have until Tuesday, April 18, to get their taxes in.

That said, you still shouldn’t wait until the very last minute to file your taxes. In fact, there are actually a number of good reasons to get your taxes in early.

Get your money back sooner

Not only did 73% of tax filers get a refund last year, but the average refund amount hovered in the $2,850 range. If you’re anticipating a refund this year, filing your taxes early should basically be a no-brainer. As long as you have all of your documents and paperwork in order, filing early means you’ll most likely get your hands on that cash sooner. In fact, the IRS expects that it will issue more than 90% of its refunds in 21 days or less from the time it receives the corresponding returns.

If you’re sitting on debt (whether it’s general debt or bills left over from the holidays), having your refund in hand sooner could save you a nice chunk of money in interest charges. Even if you don’t have debt, there’s really no reason to give the government access to your money for a longer period than necessary, so it pays to file early either way.

Keep in mind, however, that if you file a paper return, you may have to wait longer to get your cash back. Though refunds from electronically filed returns are typically issued within three weeks, it usually takes six to eight weeks to receive a refund from a paper return. Not only that, but if you file your taxes early and do so electronically, you should be able to check your refund status within 24 hours. File on paper and you’ll probably wait a solid month before your refund information even becomes available.

Prevent tax fraud

Tax fraud is a growing problem and, unfortunately, it’s easy enough these days for crooks to pull off. Typically, someone will get his or her hands on your personal information, file a return in your name, and attempt to claim your refund.

Because the IRS is equipped to flag duplicate tax returns, if this happens and you then attempt to file your own return, yours will get rejected because there will already be a return with your Social Security number in the system. At that point, the IRS will need to figure out which return is legitimate, and you’ll be sitting in limbo while that happens — not to mention waiting on your refund.

On the other hand, if you file your tax return early enough, you just might beat those criminals to the punch. Then, if someone attempts to file a return using your information, that fraudulent return will get rejected instead of yours.

Give yourself time to pay your tax debt

Not everyone gets a refund during tax season. If it turns out you owe the IRS money and you’re unable to pay off your balance in full, you’ll face a late payment penalty for whatever amount you fail to come up with. But if you file your return early, you’ll buy yourself a little extra time to come up with a game plan. That might involve selling off some possessions to scrounge up the cash or working a few extra shifts on the job to generate extra earnings.

Remember, if you owe the IRS money but file your return early, you don’t have to pay off your balance until the April 18 filing deadline. Even if you owe money, you have nothing to lose by submitting your return ahead of schedule.

One final point to consider is that the sooner you file your taxes, the sooner you can check that task off your to-do list. Filing a tax return can be a time-consuming process, so the earlier you get it done, the less stressed you’ll be.

A $6,269 opportunity lurking in your tax return?
Taxes can be confusing and downright miserable. But a handful of “tax tricks” could help millions of Americans save thousands of dollars. That’s free money you could be leaving on the table. For example: the IRS believes that a full 20% of eligible Americans miss out on a tax break worth up to $6,269… each year! Simply click here to discover how to learn more about these strategies.

Maurie Backman
(TMFBookNerd)

Filed Under: Issaquah Lifestyle Blog Tagged With: Finances, Taxes

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