While renting offers zero tax breaks, buying a home offers several tax benefits that can make home ownership more affordable.  Here are some of the benefits of home ownership:

• Home mortgage interest deduction: Home owners can take an itemized deduction on interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more
• Property tax deduction: Home owners can deduct from the federal income taxes the state and local property taxes that you pay on the home.
• Deductible home buying expenses: Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
• $250,000/$500,000 -sale exclusion: Home owners who have lived in their home for two of the prior five years prior to its sale do not have to pay income tax on the majority of their profit — $250,000 for single home owners and $500,000 for married homeowners who file jointly.
• 14 days of free rental income: Home owners can rent the home up to 14 days during the year and pay no tax at all on the rental income.

As a homeowner, always check with your tax advisor for specific advice about your situation.

Sales of million-dollar homes in San Diego County rose 15 percent in 2010, the first year-over-year increase since 2005, according to DataQuick Information Systems.

Last year, the county saw 1814 sales in that price range, up from 1,578 in 2009, a possible sign the high-end market may be picking up, real estate experts say.

That upward motion is mirrored statewide, where 22,529 homes priced at $1 million or more sold in 2010, up 21 percent from 2009, when 18,621 sold.

Though sales of high-end homes rose last year in the county, they’re still 68 percent lower than the peak of 5,671 sold in 2005, DataQuick numbers show. The trough was 1,521 in 2002.

DataQuick analyst Andres LePage said more activity in the million-dollar-plus market could be “another indication that the economy is improving.”

2009 was a very difficult time for agents with more-expensive homes, but the situation improved in late 2010, when buyers made their moves because they believed prices had reached their bottom.

Vacation rentals offer a travel lifestyle unlike any other, providing unmatched space, amenities, services, and privacy.

It’s easy to become overwhelmed with the millions of vacation rental choices online. Here are 5 important questions to consider when planning a vacation rental trip:

1. Is there a rental agreement? Review the terms and conditions of the rental agreement carefully. If there is any doubt in your mind, check with the state and/or local municipality to confirm whether the manager or owner has a business license.
2. If I have questions during my stay, who can I call for assistance?  Established companies will offer an emergency guest services contact that guests can call for questions and maintenance issues.
3. How do I know if I’m getting reliable services and facilities? Look for third-party endorsements on vacation rental websites, You can also request and evaluate past guest reviews, comments, and references.
4. How do I make a reservation?  You should be offered standardized, secure phone and/or internet reservation systems, with the ability to accept major credit cards. You should also expect to make a security deposit.
5. Should I go with a professional?  Choosing a professionally managed vacation rental will ensure that you get consistent hospitality services and quality assurance standards. In addition, going through a professional will guarantee that your vacation rental is professionally cleaned and managed.

It may take more than four years to clear the “shadow inventory” of distressed homes on the sidelines in the U.S., a factor that’s likely to undermine real estate inventory, analysts at Standard & Poor’s Ratings Services say.

At 49 months, the estimated time needed to clear shadow inventory at the end of the 4th quarter was up 11 percent from the previous quarter and 40 percent from a year ago.

But much of the increase in the estimated months needed to clear shadow inventory is due to the fact that it’s taking longer for lenders to liquidate distressed homes — not because the number of distressed properties is growing, analysts said.

Standard & Poor’s defines shadow inventory as properties with borrowers who are 90 days or more delinquent on their ortgage payments, properties currently or recently in foreclosure, or pproperties that are real estate owned.

At the current, slower rate of liquidation in the New York metro area, Standard & Poor’s analysts estimate it will take 130 months to clear $116.7 billion in shadow inventory there.

The good news is that the overall level of distressed loans continues to decline, and loan-cure success rates — often the result of loan modifications — have been improving since the second half of 2008.

Although 45 to 50 percent of loans modified or cured in the fourth quarter of 2009 redefaulted within the first year of modification, that’s an improvement from the nearly 80 percent redefault rate on loans modified or cured during the first quarter of 2008.

This month’s study, released by Bankrate Inc., shows that Americans are nearly split when it comes to gauging their financial security.  Despite the gradual economic rebound, many Americans still feel less comfortable with their finances now than they did 12 months ago.

Among the findings:

• Twice as many people feel less comfortable about their sasvings level than those who feel better: 38 percent versus 19 percent.
• Only 10 percent of people between ages 50 and 64 feel more secure about their job while 29 percent feel less secure.
• More than three quarters, or 78 percent, of Americans spent either less than or nearly equal to what they expected to spend during their holiday shopping.
• 31 percent of workers with incomes than $30,000 feel least comfortable with their debt loads. Those who earn more than $75,000 are not far behind, with 17 percent feeling less comfortable with their debt.
• Age significantly impacts overall financial security, with one of every three respondents over 50 believing theyare worse off while only 15 percent of people younger than 30 feel that way.

The Federal HousingAdministration (FHA) has extended its 90-day “no flip” rule on recently rehabbed properties for another year. The ruling, which allows investors who acquire foreclosed properties at below-market value to be exempt from waiting the customary 90 days before reselling them, was set to expire at the end of January 2011. Vicki Bott, deputy assistant secretary for single-family housing at the FHA, said that first-timebuyers have responded overwhelmingly to the opportunity to buy turnkey renovated homes with low down payments and they have performed well on the mortgage obligations.

The 90-day waiting period originally was put in place to protect FHA borrowers against predatory practices of flipping where properties were quickly resold at inflated prices in unsuspecting borrowers. Bott said that while the FHA is concerned about flipping in general, they have not seen any of the fraud problems, defaults, and reforeclosures that cost the agency millions in insurance payouts in earlier years.

Appraisals are of great interest to both buyers and sellers in this market. The President of the Appraisal Institute noted: Appraisals are especially important because they are an objective and unbiased source of information.  Unlike others involved in real estate transactions, the appraiser is an independent professional who performs a service for a fee rather than for a commission.

Knowing that an appraisal can make or break a sale or a refinance, both sellers and buyers should use these tips when getting an appraisal:

• Understand the role of appraisals
• Make sure that your lender hires a qualified appraiser
• Accompany the appraiser or have your realtor accompany the appraiser during the inspection of the property
• Provide comps to the appraiser (or your realtor can do this) to be sure the appraiser understands the nuances of your neighborhood and can correctly evaluate recently sold properties
• Request a copy of the appraisal report from the lender
• Examine the appraisal report and ask questions
• Appeal the appraisal if necessary and appropriate

If you follow these tips, the appraisal can become a very important way to substantiate the value of your property.

Wells Fargo has agreed to modify the mortgages of nearly 15,000 California homeowners who are behind in their mortgage payments under a 2 billion dollar deal with State officials. Wells Fargo and the Californfia attorney general’s office announced the settlement in connection with “pick-a-pay” loans originated by Wachovia and Oakland-based World Savings. Wells Fargo inherited the loans with the World Savings loan portfolio when they bought Wachovia in 2008.

Under the “pick-a-pay” program, mortgage borrowers could pick the level of their monthly payment  during the early years of their loans. As the loans matured, their payments sometimes would reach levels that outpaced the ability of borrowers to make the monthly mortgage payment.

Under the settlement, Wells Fargo will offer affordable loan modifications to an estimated 15,000 California borrowers with pick-a-pay loans made by World Savings or Wachovia.

Many of the modifications will include significant principal forgiveness.  The total value of the modifications mandated by the settlement is projected to be more than $2 billion.

Wells Fargo officials said they hope that homeowners who receive letters from the bank inviting them to begin a loan modification process will contact the financial firm.

For the week of January 10, 2011, the median list price in Encinitas, California 92024 is $889,000.  The inventory of 177 properties have been on the market for an average of 159 days.

Inventory has been tightening and days-on-market increasing recently. The Market Action Index has been basically flat.

Home sales have been exceeding new inventory for several weeks. Since this is a Buyer’s market, prices are not yet moving higher as excess inventory is still being consumer. However, as the supply and demand trends continue, the market will move into the Seller’s zone, and there will likely be upward pressure on pricing. With several months of inventory available at the current sales rate, buyer should find ample choice.

Recently, prices in Encinitas have settled at a plateau even though they dipped a little this week.

This remains a very good time to buy in Encinitas. There is plenty of inventory to choose from, and sellers may be negotiable about price because of the large number of days on the market.

Call Marilyn Dashe at Sea Coast Exclusive Properties for a more specific breakdown of the Encinitas market.

The number of buyers who signed contracts to purchase homes dropped in June, as the weak economy and tight lending standards kept consumers away from the housing market.

The National Association of Realtors said Tuesday that its seasonally adjusted index of sales agreements for previously occupied homes dipper 2.6% to a reading of 75.7.

That was the lowest on records dating back to 2001 and down nearly 19% from the same month a year earlier. The index has fallen more than 40% from its peak in April, 2005.

High unemployment, weak job growth, and tight credit have hurt the housing market. Sales picked up in the spring when the government was offering tax credits of up to $8000. However, once the tax credits expired on April 30th, sales plunged.

There is a growing inventory of unsold homes on the market. It has risen to almost 4 million. That’s nearly a nine-month supply at the current sales pace. It compares with a healthy level of about six months. And that doesn’t include millions of foreclosed homes that have yet to go onto the market.

“There’s too much supply for the demand that’s there,” said Michael Feder, chief executive of Radar Logic, Inc, which tracks the housing market. “That’s not a dynamic in which values go up.”