We’re only 2 days away from ringing in 2014. Can you believe an entire year has once again passed us by? Tempest fugit, indeed. How did the year shape up for you? As we get ready to watch the fireworks light up the Hawaiian skies in just over 48 hours, let’s take a look back over the past 12 months and where we may be going from here.
Improving Your Home Value
Many residents in Hawaii have taken advantage of low interest rates this past year to improve the value of their home. Did you make additions to your house? Upgrade your kitchen? Plant a new flower garden or install a new roof? Upgrade to solar? Build a pergola, perhaps, or a new ohana unit?
Sometimes the best way to add value is addition by subtraction. Removing unpermitted structures or trimming back sprawling mango trees or great ways to give a cleaner look. Even de-cluttering the house, both inside and out, can do wonders.
If you haven’t done any of these yet, you may want to add one or two (or more) items to your 2014 home bucket list while loan rates are relatively low…. for now….
About to Get Interest-ing
If you haven’t been paying attention to the economic indicators lately, mortgage rates are starting to climb. In addition, it’s going to be a bit harder to qualify for mortgages very soon. You may need to bring a bigger down payment or pare down your budget if you’re shopping for a new home. If you’re looking to buy sooner than later, it may be time to get aggressive with your shopping. Free up your Sundays for open houses, my friends!
Yet while slowly but steadily rising interest rates may temper local house prices, those prices have also been steadily increasing. Most people agree that real estate in Hawaii will continue to get more pricey, even with more expensive mortgage rates. So if you’re in real estate for the long haul, you may want to lock up your next home or investment property earlier in the year. By the second half of 2014, the median price of a single family house might have risen another $20,000 or more.
And it’s not just Oahu. The neighbor islands have also reported strong price increases. Across the state, Hawaii real estate continues to be in demand.
Changes in Mortgage Forgiveness?
Let’s change gears. Most people acknowledge the secret “shadow inventory” that’s still being held back by the banks. What’s a bit more apparent is that there are fewer REOs hitting the market (REOs are foreclosed homes taken back by the banks). But don’t misread the tea leaves. There are still many homeowners with underwater mortgages.
Unfortunately, one perk for these owners is expiring with the turn of the calendar — the ability to waive interest on mortgage forgiveness. For example, if you owed your lender $500,000 but sold your house via short sale for $450,000, the $50,000 difference is considered taxable by the IRS. The law of the land has been that as long as the property was your principal residence, you could waive the taxes on that $50,000 when did submitted your return (and some other qualifications).
That law is coming off the books. But the same happened last year and the elected men and women over in DC renewed it for 2013. Might the same happen for 2014? I think it will. It won’t get announced on January 1, but look for this bit of news sometime before the end of January and for it to apply retroactively to previously completed short sales.
What are YOUR plans for 2014?