Some time ago I was asked by the family of an elderly gentleman to preview his home and make a determination on price.  The family was preparing for the inevitable …. placing their father in a local assisted care living arrangement and  needed to do some financial arrangements.

 I paid a visit to the gentleman and was transported into a wierd and wonderful tour through his life’s history.  He had been a developer of post war homes in the midwest and considered a hero there, he was getting ready to  go to a celebration in this small midwestern town where he would be honored for his contributions to the community.  His life in Carmel Valley now revolved around growing Orchids “the most beautiful flower in the world”, he said. There were Orchids in ever inch of the home - including the turning of his laundry and kitchen into the potting shed for these lovely plants.  I left with no less than 3 orchids for my home.  It was a strange and whaky afternoon and I walked out less sure of the reason I visited than when I walked in.  The house will sell for over 1M but my visit with this elderly gentleman was priceless……….

Assuming that this tax break translates into mortgage interest rate adjustments downward then this tax break will possibly help in the first time buyer segment of the market. 

As for the Monterey Peninsula I would suspect the relief will be moderately helpful in the entry level markets as most buyer’s are still looking at jumbo loans.  For the remainder of the buyer’s they are often trading one property for another or coming into the marketplace with a large amount of cash or substantial lines of credit.  

What seems most important to me is that the general feeling improves with regarding to real estate and the economy in general.  We all know that perception is reality ….. reality is that rates have been very good throughout the market shift and yet the feelings toward the market have been negative to say the least.   

As we’ve all heard in the news, way too much in my opinion.  Foreclosures, short-sales and deeds in leu of foreclosure are upon is in some areas.  Here we are seeing the bulk of them in Salinas, Greenfield, Marina and some Seaside … with a smattering of properties in Monterey, Pebble Beach and Pacific Grove.  Until the Mortgage Forgiveness Debt Relief Act of 2007, which was signed by President Bush on Dec. 20 the property owner not only lost all of the money in the property, suffered credit damage but they had double whamie called Tax Consequences.  This can all be quite complicated and certainly requires a tax accountant (and a good one at that) to steer the mortgagee in the right direction.  Recently The California Assn. of Realtors’ Member Legal Services team has published a revised legal article, “Taxation of Foreclosures, Deeds in Lieu of Foreclosure, and Short Sales.”

The article is detailed and thorough and may be of use for anyone facing this tragic event.  Get a cup of coffee, focus and read about it on their website… 

www.car.org, or go directly to http://www.car.org/index.php?id=Mzc3MDM= .

Just got finished listening to my favorite song of all time R.E.M.’s ”Stand” well it is actually a close second to 4 Non Blonds but we’ll save that discussion for later.  Now that I have regressed and even worse dated myself my point is…… let’s stand in the place that we are right now! 

 I have two clients that purchased let’s say “starter homes” here on the Monterey Peninsula last year (that would be 500-700K range).  They both were able to negotiate a sizeable discount off the list price, with a little help from their friend me :-), obtain excellent interest rates on their loans and one managed to get a special discounted, long term loan from a large bank with certain income requirements.  That loan is no longer in existence as of 12/31/07.  And they are both enjoying the benefits (tax and other) of homeownership.

So I run into one client and he is aware of the price instability around his neighborhood and tells me he is still thrilled to be a homeowner and continues to put personal touches in the home. No more white wall rentals and cramped quarters for his dog.  He understands that he got into the market when rates were substantially better than they are now and with the tax benefits and pride of homeownership he is in it for the long haul.

 My other client while still thrilled about having a home of her own, keeps checking the prices and comparing her neighborhood sales every day. I sense a tension in her voice and yet she actually is better off having purchased last year than she would be now.  With the special loan obtained at a rate and terms no longer available she could not buy the same house today.  With the down payment required in the current market place and the increased interest rate she would be out of pocket approx. 65K just to get in the home she has now six months later.  

 So I say stand in the place were you live and enjoy the opportunity of home ownership, tax benefits, freedom in decorating and whatever else owning your home may mean to you. 

 The marketplace will go up and down and if we are constantly chasing it we will be worn out.   A wise man once said “And this, too, shall pass.