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Tax Credit Certificates On the Rise

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 15th, 2016

As the drive to create more affordable housing strengthens, more and more state and local housing authorities are issuing mortgage tax credit certificates (MCCs). These help qualified low- and moderate-income buyers offset a portion of the interest they pay every year for their home loans.

The MCC program was established by the Deficit Reduction Act of 1984 and modified by the Tax Reform Act of 1986. After peaking in 1997, the number of tax returns claiming the credit dipped by more than 50 percent, then started to take off again in 2007.

The maximum tax credit allowable each year is $2,000 -- maybe not much, in the grand scheme of things. But it is a dollar-for-dollar reduction against your federal tax liability, as opposed to a typical deduction, so it comes directly off your bottom line.

Better yet, it can be layered onto other government programs that also seek to make housing more affordable. And lenders sometimes add the credit to your income, so you might qualify to purchase a bit more home.

However, MCCs "are not a silver bullet," says Rob Chrane of DownPaymentResource.com, a website that lists some 2,400 different programs nationwide. "They won't cure all ills, but they can help move the needle significantly."

According to the latest figures from the National Council of State Housing Agencies (NCSHA), state authorities more than tripled their issuances of MCCs between 2012 and 2014. And that doesn't include the numerous local housing finance authorities, which also issue MCCs. In Texas, DownPaymentResource counts 19 local issuers, besides the state agency. In California, 12 local issuers offer MCCs.

"We've seen a large increase in issuances," says Greg Zagorski of the NCSHA. "We're seeing a lot more interest in the program as states seek to rebuild their single-family lending programs."

Currently, 34 states issue the credit certificates, and the District of Columbia introduced MCCs in the nation's capital just last month. (The states that do not yet offer MCCs are Alaska, Connecticut, Georgia, Kansas, Louisiana, Maine, Massachusetts, Nebraska, New Jersey, New Mexico, New York, North Dakota, Oregon, Tennessee, Utah and West Virginia.)

Here are the program's basics:

Each year, your mortgage tax credit will be calculated based on a percentage of the total interest paid on the loan that year. The percentage varies depending on the program, but it ranges from 20 percent to 50 percent. According to DownPaymentResource, 40 percent is typical.

The certificate remains in effect for the term of the mortgage, as long as the underlying property remains your principal residence. You can adjust your withholding on your W-4 to take the credit into account, so you will have a bit more take-home pay listed. And your lender can use the added income to approve a somewhat larger loan.

Homebuyer education is required, though. You must take a course from a counseling agency approved by the Department of Housing and Urban Development prior to closing.

The program is open to individuals and families who meet certain income and purchase requirements. These rules are different for each issuing authority. In Maryland, for example, the maximum sales price ranges from $255,000 in rural areas to $525,000 in Baltimore proper. Income limits also vary in the Old Line State, based on household size, from $89,000 in rural areas to $152,000 in urban areas.

Across the Potomac River in Virginia, meanwhile, the max sales prices range from $251,900 in rural spots to $500,000 in urban core areas. The max income ranges from $121,900 for one- and two-person households to $142,300 for households with three to eight people. In Virginia, moreover, there is a significant federal recapture tax if you sell the house within nine years and realize a significant increase in income.

Also, you must use the house as your primary residence and cannot have owned your main home for the previous three years. Veterans are exempt from the three-year rule.

Again, the maximum amount of the credit cannot exceed $2,000 in a single year. And the credit cannot be any larger than your federal tax liability after all other credits and deductions have been taken into account.

But credits in excess of your current-year tax liability can be carried over for use in subsequent years.

According to NCSHA data for 2013, the national average loan amount of a borrower who used a mortgage credit certificate was $156,632. The average borrower income was $52,862. About 1 in 4 MCCs were claimed by minorities, and nearly 2 out of every 5 were claimed by female heads-of-household.

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Lay It Again, SAM: Could Robots Build Your Next House?

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 8th, 2016

SAM is a bricklayer who never takes a day off, doesn't call in sick, never checks his cellphone and doesn't even take a coffee break.

Some would say that's inhuman, and they'd be right. SAM -- Semi-Automated Mason, that is -- is a robot. Once he's programmed by his handlers, he takes off, laying brick after brick after brick without saying a word. He can lay 1,000 bricks an hour and finish the typical two-story house in two days.

Created by engineers in Perth, Australia, SAM auto-corrects 1,000 times per second to prevent interference from sway and vibrations. Slapping mortar on the bricks and then putting them in place -- the exact opposite of the way humans do brickwork -- the machine is 20 times faster than a journeyman mason.

People still do the grunt work, like mixing the mortar and loading the bricks into the robot. It takes about an hour to set up the tracks, according to SAM's inventors, and then he -- oops, it -- is off. Enter the critical measurements for wall heights, window sizes and locations, and the machine lays brick all day long.

Some people don't think the robotic bricklayer will ever catch on in the real world of residential construction.

"Builders have been engaged for a thousand years trying to create a system better than masonry," posted one naysayer on ProTradeCraft.com, suggesting that it will take "our mechanical friend's inventors" just as long to get it right.

"I have to say, this will never work to be cost-effective," posted another doubter.

They may be right. But there's no doubt that robotics will one day be commonplace, if not to help erect the house, than inside the house to help simplify its inhabitants' lives.

Take robotic vacuums, for example. They made their debut in 2009 and have become hugely popular. The latest models can self-start on a programmed schedule, vacuum, sweep and mop an entire floor in a single cycle and return to their charging stations when their batteries run low.

Meanwhile, Asus, a maker of laptops and phones, has unveiled a plan to break into the "aging in place" market with Zenbo. At $599, Zenbo is marketed as a "fairly affordable" home robot that helps manage its owner's health and smart devices, according to trade pub TechHomeBuilder. Zenbo will remind people of doctor's appointments, medication and exercise schedules, while ultimately keeping a virtual eye out for emergencies.

Construction, on the other hand, has yet to be transformed by automation. But with builders finding it ever more difficult to find skilled labor in almost every trade, it's inevitable that "steel-collar workers," as robots are sometimes called, will replace some blue-collar workers on job sites.

"Anywhere you have unsafe, boring or drudgery work, or heavy lifting or something else physically demanding, you can have a machine do it," said Scott Peters of Construction Robotics in an article on HowStuffWorks.com. "What you have to do is find ways to define the problem and then add sensors and smart technology to do the task."

How about big, strong robotic helicopters, hoisting roof joists or wall sections into place? Daniel McQuade, chief executive officer of Tishman Construction, is thinking about them for commercial construction, so why not for houses, too? "In the next 10 years, there will be drones, with a guy running them from a safe place," he said at an Urban Land Institute meeting last fall.

And there are already driverless cars, so why not driverless construction vehicles? The Japanese firm Komatsu, which makes wheel loaders, excavators, dozers, crushers and dump trucks, is reportedly building robotic bulldozers guided by cameras, lasers and 3-D data transmitted by aerial drones hovering above them.

Then there's the giant 3-D robot printer created by a University of Southern California (USC) professor that can build a complete house in a single day. The robot can read an architect's computer-aided design drawings and spit out exactly what the plans call for. Building the house from the ground up, the machine, which looks like scaffolding with nozzles, loads up on semi-liquid concrete and extrudes it, layer by layer, into wall structures and domed roofs.

Sure, the robot could pop out cookie-cutter houses, one after another, as well a one-of-a-kind custom homes. But USC's Behrokh Khoshnevis, a professor of industrial and systems engineering, says his "Contour Crafting" robot can also build fast post-disaster housing for the displaced, military housing for our folks in uniform, inner-city and in-fill houses for people in need, and houses in developing countries.

Because the robot is quicker than humans -- and, once programmed, needs no rest -- Khoshnevis claims a 45 percent to 55 percent savings in labor. There's also an estimated 25 percent to 30 percent savings in materials -- with no waste.

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Quick Takes: Low Rates, 'Free Jet With Condo' and More

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | July 1st, 2016

Everyone -- well, practically everyone -- applauds lower mortgage rates. And why not? Lower rates mean homebuyers have more buying power.

In May, the average 30-year loan rate was 3.6 percent -- the lowest it has been in 36 months. But there is a downside.

When rates slip, points out Jonathan Smoke, chief economist at Realtor.com, the availability of credit declines. Lenders pull in their horns because it becomes more difficult to make a profit. "With little margin, lenders become more risk-averse," says Smoke.

While Smoke believes mortgage rates are likely to remain under 4 percent through the summer and into the early fall, they could spring up to more than 4 percent by the holidays. His advice: Stay on top of rates, work closely with your lender, and become familiar with options like interest rate locks and float-downs (a type of rate reduction).

"Given how volatile rates have been this year," he says, "borrowers are likely to see both lower and higher rates from time of application to time of closing, which is what makes these options potentially attractive. However, they do come at a price, so you need to weigh the potential gains against the costs with your lender."

There is garden-variety customer service, as practiced by many real estate professionals. There is great customer service, practiced by some. And there there's Jeff Miller.

Miller, a loan officer with PrimeLending in Tucson, Arizona, outshone them all in April, when he officiated the wedding of clients Donovan Riley and Rebecca Noreen.

When working to secure the engaged couple's mortgage in January, Miller half-jokingly told the pair that he was ordained, and that if they needed an officiant for their wedding, he would be happy to step in. He said he never expected to actually receive a call, but in March, he did: Riley and Noreen were experiencing difficulty lining up an officiant. So they reached out to Miller to see just how serious he was.

The pair was married, by their mortgage officer, on April 9.

A mortgage is definitely a long-term commitment, but this one came with an "until death do us part" rider. Now that's customer service.

President Herbert Hoover promised "a chicken in every pot." Now, South Florida real estate developer Tim Lobanov is promising a jet with every condo.

To boost sales at the Aurora development in Sunny Isles Beach, Florida, Lobanov -- managing director of the Verzasca Group -- is offering complimentary one-year memberships with JetSmarter, a service that allows members to charter private jets.

Surprisingly, prices at the 61-unit "boutique" condominium on the famed Collins Avenue seem fairly reasonable, at least for South Florida: $840,000 for a two-bedroom apartment, $920,000 for two bedrooms and a den and $1.4 million for a three-bedroom unit.

There's no doubt that the internet has allowed would-be homebuyers to do much of their searching online. There are about 123 million unique visitors per month to the top three real estate web portals, most of whom are seeing what's available and reading the latest "how-to" articles.

Now, QValue, a Denver technology company, has developed a formula that allows the computer to actually find specific houses based on what buyers say they want. In a test in April, a buyer told the computer and an agent what he liked, and the machine and the real estate professional went about the task of finding just the right house.

The experiment went on for three consecutive days, with the buyer entering different requirements each day. And each day, the computer turned in the buyer's favorite.

The difference: The QValue algorithm runs on "emotionally triggering" qualitative criteria, as opposed to quantitative measures such as price and number of bedrooms.

Chinese investment in the U.S. real estate market has surpassed $300 billion and is still growing, despite China's economic weakness and increased currency controls, according to new research.

Between 2010 and 2015, Chinese buyers bought $93 billion worth of residential real estate, nearly $208 billion of mortgage-backed securities and roughly $17 billion of commercial real estate, including office towers and hotels. The data comes from a report by the Rosen Consulting Group and the Asia Society.

Despite those eye-popping numbers, direct investment from China still makes up only 10 percent of all foreign investment into U.S. real estate.

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