Wednesday, April 30, 2008

Federal Reserve Cuts Fed Funds Rate by .25% from 2.25% to 2.00%

Federal Reserve Lowers Fed Funds Rate

The Federal Reserve cut the Fed Funds Rate by 0.25% from 2.25% to 2.00% today. The Federal Reserve also signaled that its rate cutting may be coming to an end. The smaller cut in the Fed Funds Rate, which was the 7th cut in the Fed Funds Rate since September 2007, was conservative compared to recent larger cuts and reflected upward pressure on inflation.

The Federal Reserve Board's Federal Open Market Committee (FOMC) voted 8 to 2 to cut the Fed Funds Rate at which banks lend money to each other by 0.25% from 2.25% to 2.00%, the lowest Fed Funds Rate since November 2004.

Discount Rate Also Lowered

The FOMC also lowered the discount rate charged to banks and brokers that borrow funds directly from the Federal Reserve's Discount Window by 0.25% from 2.50% to 2.25%.

Sunday, April 27, 2008

The Market is Coming, The Market is Coming; Part II

I was getting caught up on some of my technical reading and finally got to The Kiplinger Letter. The Kiplinger Letter is usually short, sweet and to the point, very much on topic, and usually pretty accurate. It's a great weekly read to keep up with the happenings.

The Kiplinger Letter issues on Wednesday, April 18, 2008 starts right off with:

"Dear Client:

Amid the housing doom and gloom...rising foreclosures, plunging housing starts, scores of unsold homes and falling prices...It's hard to even imagine a recovery. But still obscured in the ashes...Seeds of rebirth are germinating."

I could not have written it any better than they and they certainly reiterate what I have been saying all month long. The real estate market has started turning the corner! The January/February months were the bottom of the market in terms of volume/activity (not price/valuation). We will begin the slow crawl out of the hole that we fell into.

Now, don't get me wrong.

This does not mean that we are home free. We are in a pretty deep hole. We have a lot of work to do. And, we have not seen the bottom of the market in terms of price or valuation. We have only seen the bottom in terms of volume or activity.

Buyers are beginning to jump into the market when (and if) the property is priced to sell. The buyers see and smell opportunity. And, sellers are finally beginning to realize that if they want to sell their real estate they must lower their expectations and price their properties to sell. We most likely still have 9 to 12 months to go before we see the bottom of the market in terms of price or valuation.

The Kiplinger Letter put it very nicely:

"Home builders aren't finished with additional markdowns...up to $100,000 on homes once priced at $300,000, for example. And, they're sealing deals by adding flat panel TVs and other amenities.

But more and more buyers won't wait much longer to try and catch the absolute bottom price. With mortgage rates at low levels...under 6% for a 30-year fixed...qualified buyers are pulling the trigger."

Kiplinger's comments reflects what we have started to see around the United States in a number of geographic real estate markets.

Saturday, April 26, 2008

The Market is Coming, The Market is Coming

December and January were horrible markets in terms of transactional real estate volume. I've heard this same sentiment from real estate professionals and advisors from all over the United States. However, the market is beginning to turn!

The Market Is Coming Back, Slowly!

We have seen a steady increase at Exeter 1031 Exchange Services, LLC in our tax deferred exchange transactional activity since the last week of February 2008. It was very subtle at first and we didn't want to get overly excited about the market, but it is now clear that the market is changing, although very, very slowly.

Transactional Bottom; Not Valuation

I personally believe that the January and February 2008 was the bottom of the real estate market in terms of transaction or activity. I do not think that we have seen the bottom of the real estaet market in terms of valuation, but I do think that we have seen the worst of the real estate market at this point and that buyers are now realizing there are opportunities in the real estate market and sellers have started to come back to reality and price their properties accordingly (if they really want to sell).

We still have some rocky waters to navigate through, but we are optimistic about the status of the market.

Friday, April 04, 2008

State of California Proposes Restrictions on 1031 Exchange Property

State of California Proposes to Require that Like-Kind Replacement Property for Tax-Deferred Exchanges be located within the State of California.

The California Legislative Analyst's Office (LAO) has issued a proposed change to the State of California's requirements for 1031 exchanges. The proposal would disallow Tax Deferred Exchanges of California real property into out-of-state (non-California) "commercial" property (commercial property has not been adequately defined at this point in time).

Federal Capital Gain Taxes Deferred; but State of California Capital Gain Taxes Would Be Recognized

This proposed change would mean that you could still complete a tax-deferred exchange and the Federal capital gain and depreciation recapture income tax liabilities would continue to be tax-deferred, but any State of California capital gain and depreciation recapture income taxes would be realized and recognized unless the like-kind replacement property was also acquired within the State of California.

We will provide you with updated information as it becomes available.