Getting Value for Your Money
In many parts of the country housing prices are falling. Areas that were hit first were those that had a large escalation in price during the bubble period. Now other parts of the country are getting hit as well due to the increase in unemployment. With fewer people able to purchase and keep making payments on their mortgage and more houses coming on the market all the times, housing prices are bound to drop, its simple supply and demand. Right now there is a lot of supply but not much demand. So how do you know whether the property you are looking at will hold its value?
There is no absolute way to know whether you are getting a great price on real estate or if the value will fall further, however, by looking at certain factors about the area, you can determine whether the price asked is realistic for the area. Sound confusing, let me explain.
1. Compare Average Income to Average Housing Prices
During the housing bubble, many times the housing values were much higher than the average incomes in the area (City, County, etc.) could support. In Jacksonville, FL during that time, the average salary was around $30,000 per person but the average house was over $200,000. How can a person making $30,000 afford a $200,000 house? They can’t, that ’s why we are in the mess we are in. So when purchasing a house, you want to look at the average salary/income for people in that area. Not only is this important to determine whether the house is overvalued but also when considering your ability to resell the property later. If most people in the area don’t make enough to afford the house it could take a long time to sell.
2. Look at Number of Homes for Sale in Area
Another factor that you should look at when determining whether the house is overpriced is to look at how many homes are for sale in the area. More houses available for sale drives down the price. It is the basic economic concept of supply and demand. If there is more supply than demand, the price goes down.
3. Look at How Long the Homes Have Been on the Market
When looking for how many homes are for sale, you will also want to know how long the homes have been on the market. If 5 houses in the neighborhood just went on the market last month, the price of the house has likely not been adjusted yet to reflect the excess houses on the market. If the house has been on the market for a year, it is likely that the house has been adjusted down from the original listing price, but it may still be a bit high since it is still on the market after such a long time.
4. Look at Employment Opportunities
Currently in Florida there is an interesting situation, communities are springing up with no real industry or jobs to support the local market. If you don’t know the area, one tip that there might be an issue like this is when the town you are looking at has average housing prices quite a bit lower than neighboring towns. Once the bubble burst, people realized that they couldn’t sell these homes because people needed jobs to pay the mortgage and there were little to no real jobs in these towns other than bagging groceries. As a result, these housing prices have fallen much more dramatically than those of the surrounding communities and will be slower to return to their higher values.
The bottom line is there is no absolute way to know what the best price is, you need to go with what you think the house is worth and if the seller accepts it, yeah you got it, if not move on there are plenty of other properties available.
Help! I can’t do my taxes!!
Many people today don’t know how to keep a checkbook or balance their bank statement let alone how to file an income tax return. If you are in this boat, don’t worry, there are plenty of ways to get your taxes filed without paying someone a hundred dollars to do the return for you.
The IRS websire has a list of programs designed to help tax illiterate people either file their own tax returns using easy to use software or find a program that will do simple tax returns for free. However, it doesn’t hurt to know a few key concepts just to make sure your preparer really is getting you the most money possible.
First, you need to know your filing status. The options here are single, married filing jointly (or qualified widow/widower with a dependent child), head of household, or married filing separately.
1. Single
This is for people who have never been married, are legally separated, or are widowed before January 1st of the tax year you are filing the return for (here it would be January 1, 2008) and did not remarry during the year and don’t have a legally dependent child. To claim this as a legally separated person, you need to do more than just have a fight and move out of the house, you need to take the steps required by your state of residence, ie the state that you live in, to legally separate. This can include a decree of divorce or a maintenance agreement.
2. Married filing jointly
Most married couples select this option. Couples can select this option is they married during 2008, even if they married on the last day of the year. You can also select this option if you were widowed in 2008 as long as you were married at least one day during the year.
When selecting your status, you should keep in mind that this status is determined under federal law. Same sex couples who were legally married in their state are not qualified as married for federal income tax purposes.
3. Married filing separately
Some couples elect this option because one spouse has higher itemized deductions and would get a larger return if using only that spouses income rather than both spouses. However, if you select this option you are not allowed to deduct education expenses such as tuition, fees, student loan interest or education credits, nor can you claim the earned income credit.
4. Head of Household
This status is for an unmarried person (single) who has a dependent. This dependent can be the individual’s child or close relation that the individual pays more than half the support for, including maintaining a home that the dependent lived in more than half the year.
Another great thing to know about when getting your taxes done is the earned income credit. The earned income credit is an additional tax credit for lower income people who work. Most people who qualify for this credit have at least one child.
Eat More Pay Less
Have you ever stopped to think about how much food the average American has in his house without even realizing it. Yes, we all head to the fridge, hand our heads, and moan that there isn’t anything to eat, but what we mean is the fridge doesn’t have what I want to eat right now.
I challenge you to start making a list of what you actually do have in your house to eat though. Believe me, you will be surprised. Most of us have at least 2-3 boxes of pasta in a drawer or pantry, a couple of pieces of meat, some cans of soup, vegetables, beans, maybe a can or two of tuna fish. When you sit down and think about it, there is enough food in the house already to feed your house for probably a month, the key is to use it.
Instead of going grocery shopping when you are hungry or in a hurry and you just throw everything that sounds good or is a quick meal into your cart, take a moment to sit down, write out what you already have in your house, and come up with a meal plan that will use up some of those things that are just sitting around. Not only will this save you money on your grocery bill, these meals will likely be healthier because you are taking the time to plan them out and thus can ensure that you get so many vegetables and fruits per day other than french fries and cinnamon apples.
When you do go to the store, take your list along and only get what you need. Grazing just adds extra expense and calories to your day. You don’t really need that box of popsicles or that bag or cookies. If you want something sweet, get the ingredients and make it yourself or with your kids. This can be a great bonding time and then you also know what your kids are actually eating rather than all those unpronouncable chemicals listed on the back of boxes these days. People don’t have as much money now, but because many are working less, they do have the extra time to spend with their kids cooking and creating shopping lists that ensure they stick to their budget.
Housing, is this a good price, will it fall further, how do I know?
Florida was hit hard during the housing bubble. Prices escalated like crazy. Now they are falling like a rock. I have been researching some potential rental purchases for a client and the asking price for the houses are currently $200,000 less than they sold for in 2005/2006. That may seem like a lot, it may not, however, you don’t have all the stats yet. In 2005, one house was purchased for $360,000, today it is selling for $159,000! That is a huge difference. So what went wrong and how do I know that $159,000 is a good price or will it continue to drop even further?
There is no absolute way to know whether you are getting a great price on real estate or if the value will fall further, however, by looking at certain factors about the area, you can determine whether the price asked is realistic for the area. Sound confusing, let me explain.
During the housing bubble, many times the housing values were much higher than the average incomes in the area (City, County, etc.) could support. In Jacksonville, FL during that time, the average salary was around $30,000 per person but the average house was over $200,000. How can a person making $30,000 afford a $200,000 house? They can’t, that ’s why we are in the mess we are in. So when purchasing a house, you want to look at the average salary/income for people in that area. Not only is this important to determine whether the house is overvalued but also when considering your ability to resell the property later. If most people in the area don’t make enough to afford the house it could take a long time to sell.
Another factor that you should look at when determining whether the house is overpriced is to look at how many homes are for sale in the area. More houses available for sale drives down the price. It is the basic economic concept of supply and demand. If there is more supply than demand, the price goes down.
When looking for how many homes are for sale, you will also want to know how long the homes have been on the market. If 5 houses in the neighborhood just went on the market last month, the price of the house has likely not been adjusted yet to reflect the excess houses on the market. If the house has been on the market for a year, it is likely that the house has been adjusted down from the original listing price, but it may still be a bit high since it is still on the market after such a long time.
The bottom line is there is no absolute way to know what the best price is, you need to go with what you think the house is worth and if the seller accepts it, yeah you got it, if not move on there are plenty of other properties available.