THE 2013 FISCAL DEAL AND HOW IT AFFECTS THE REAL ESTATE MARKET

So the deal is done...Well half way at least. So how does this affect the real estate market? Well I've been doing my research and this is what I've come up with. On one end of the spectrum you have the wealthy home owners who were considering selling at some point in the near future. Well if they were looking to recoup money on their investment after the fiscal cliff deal was passed they're in for a shock. The capital-gains tax has effectively gone up as of midnight. Therefore sellers in the high-end real-estate market could owe millions more in taxes on their sales. As a result, many wealthy sellers have either been racing to close before 2013 or will now be looking to hold until the next highly charged debate in congress. The speculators are predicting a surge of high end properties to hit the market, effectively pushing down prices even more and running a ripple effect throughout the entire real estate market. One solution to this problem as in one of my recent deals is to offer your buyer, seller financing. That way you avoid paying that capital gains tax for a number of years while you earn interest on the money the owner has lent the buyer. I'm no economist but rich seem to be pretty savvy at hiding money and avoiding taxes so by adding creative financing to the mix of ways to avoid paying taxes doesn't surprise me. ************************************* On the other end of the spectrum you have a large portion of the shrinking middle class who've been hit with a job-loss, income reduction or property value deduction. Don't get me wrong this has not only been a problem for the middle & lower class, there are plenty of wealthy homeowners who've lost substantial value in their homes as well. But for the millions of Americans who have basically lost everything that took generations to build and in the blink of a CDO/Swap deal it's was completely lost due to the evil dealings of some crummy Wall Street guys it's a good thing that the "cliff deal" has continued to offer "us" protection. According to the new "fiscal deal" the sun may be shinning a little brighter for those trampled Americans hanging on by a string. If your home is worth significantly less than when you purchased it, you’ve likely been seeking out some type of modification with your lender (Good luck with that!). Or perhaps things have gotten so bad that you’re facing foreclosure or a short sale. Well according to a recent article and I'm sorry but I can't recall where I found it....Here’s the thing: anytime a mortgage is modified (i.e., reduced), the borrower is required to recognize cancellation of indebtedness (COD) income to the extent of the debt forgiveness. Similarly, if a property is sold at foreclosure or in a short sale and the underlying mortgage is recourse (meaning the borrower has personal responsibility for any excess loan deficiency remaining after the sale), then to the extent the remaining deficiency is forgiven, the borrower will again recognize COD income. In the foreclosure or short sale context, this COD income is NOT treated as gain from the sale of the home, and thus is not eligible for exclusion under Section 121, which allows married taxpayers to exclude up to $500,000 of gain on the sale of a home, provided they have owned and used the home as their principal residence for two of the prior five years. As a result, barring some sort of statutory relief, the COD income must be recognized. Ex: A owns a primary residence with a basis of $500,000 that is subject to a recourse mortgage with a balance of $400,000. After the property declines in value to $300,000, the lender and A agree to enter into a short sale. As a result, A sells the home to an unrelated buyer, B for $300,000. A remits the $300,000 sales price to the lender in settlement of the $400,000 debt, leaving A with a $100,000 remaining deficiency. If the lender forgives the remaining deficiency, A will recognize $100,000 of COD income. When the real estate bubble burst and the resulting run on foreclosures and debt modifications began, Congress recognized that something had to be done, as it seemed patently unfair to tax homeowners on COD income when they couldn’t even afford to service the mortgage on the home. And while exclusions to COD income have always existed under Section 108, prior to 2007 those exclusions were only of use to a homeowner if the homeowner were insolvent or bankrupt. What this means in layman's terms is if you owe a lot of money on a property and have lost considerable value in your home due to the financial crisis. You no longer need to file bankruptcy to avoid paying taxes on the additional income not paid down by the short sale or foreclosure of your home. I believe the $2,000,000 threshold may be broken down differently between those who are single and those who are married but this is a good thing. Not having to pay taxes on $2,000,000 effectively lost dollars makes sense especially if you don't have it! At this point I'm still doing my research and will check back when I have more information. All the best in 2013!

THE WALL STREET JOURNAL ON J.P. MORGAN'S PREDICTIONS FOR THE 2013 HOUSING MARKET.

I found this article in the WSJ and I wanted to get your opinion on what you may feel about J.P. Morgan Chase's predictions for the 2013 housing market: Published by Al Yoon 12/14/12 J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth. Standard & Poor’s, which rates private-issue mortgage bonds, on Friday said it expects a 5% rise in 2013. The J.P. Morgan analysts boosted their base-case estimate from 1.5% after a convincing rise in the “net demand” for housing this year has surpassed 2 million homes for the first time since 2006, said John Sim, a strategist at the investment bank. Net demand is the pace of existing home sales minus the inventory of homes available for sale. “Net demand has picked up a lot in 2012,” said Mr. Sim. “Once you get north of the 2 million territory, you are in the positive growth area unless you get a lot of distressed inventory, which this year hit a low point” since at least 2008, he added. J.P. Morgan predicts that net demand to rise from 2.7 million next year from 2.3 million this year. An expected increase in home prices in 2012 triggered a run into some of the riskiest real estate assets, such as subprime mortgage-backed securities from the real estate boom, and analysts including Mr. Sim expect that trend to continue. Rising home prices and the quest for yield has also given a tailwind to new mortgage bond issuance that has been mired in the fallout of the housing crisis and regulatory uncertainty for the past four years. U.S. home prices nationwide increased on a year-over-year basis by 6.3% in October, the biggest increase since June 2006, according to CoreLogic. Investors zoning in on the increases bought subprime mortgage bonds, which have posted returns of more than 40% since December. Home price increases could exceed J.P. Morgan’s base forecast if investors seeking yield push deeper into real estate, according to Mr. Sim’s home price report. That may already be happening, considering recent comments by Luke Scolastico, a vice president at Credit Suisse, one of two issuers of mortgage bonds without government backing since the financial crisis. Credit Suisse is increasing its purchases of jumbo loans to meet demand for securities it sees from investors, he said on an American Securitization Forum panel this week. “We’re buying loans, every day…and (on the month,) more than the month before,” Mr. Scolastico said. Part of the reason is because of home price appreciation, but also because of the “technical demand” for relatively higher yielding assets as Federal Reserve policies depress interest rates, he said. New mortgage bond sales from other issuers, including investment banks, could boost issuance of private label bonds this year as high as $30 billion, Mr. Sim said. That’s up from almost $5 billion this year but paltry compared with annual volume above $1 trillion generated as the housing bubble neared its breaking point in 2006. Mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae still fund more than 90% of new home loans. Bank portfolios and other private lending make up the rest. Considering risks, J.P. Morgan analysts conceded that the economy is “gloomy” and tight lending standards can stop a bullish homebuyer from proceeding with a purchase. On the supply side, the “shadow inventory” of more than four million homes near or stuck in foreclosure still looms, though that is dropping, the analysts said. What’s more, just the uncertainty over whether politicians will be able to steer clear of the “fiscal cliff,” the scheduled tax increases and spending cuts next month, may hurt investor confidence, the J.P. Morgan analysts said. If taxes rise, reduced income for the potential homebuyers will damp housing demand, they added. But the expectations for higher home prices are still widespread. Nearly three-quarters of investors polled by J.P. Morgan expect home prices to rise 5% in 2013.

VAN VORST PARK

I live in the Van Vorst Park Neighborhood and I thought it would be kind of cool to post some of the things I truly love about my neighborhood. First and foremost, the Jersey City Public Library is awesome. It's not the greatest when it comes to offering best sellers and new releases but I will tell you this, they have the most awesome historical records section on Jersey City! Being in real estate I sometimes like to find out who may have lived in a particular home, prior to what's listed on the tax records or what a specific neighborhood was like circa 1860. It's remarkable to discover the amazing history of this city. Secondly, would of course be my beloved Van Vorst Park in the springtime. It's a delightful feeling to see the trees pop with colorful flowers and watch the Park liven up after a long cold winter. In addition, the dog run is always filled to the brim with neighbors; and quite frankly, I think it has enhanced the neighborhood's community feel by getting people out to walk their dogs and meet one another. Often on my days off, when the weather is nice, I like to sit in the park near the fountain and watch the birds playing in the water...It's very relaxing. Another thing I enjoy about this neighborhood is probably the Barrow Mansion. The Barrow Mansion hosts all sorts of community activities but one of my all time favorites is the theater productions hosted by the Attic Ensemble. I'm a freelance actor outside of real estate and I truly love the fact that Jersey City has a community theater with some very professional actors, as well as, pretty thought provoking productions to attend each season. And finally, I guess I would have to say summertime in the neighborhood. This past summer was chock full of activities... I attended several farmers markets, stoop sales, a couple of films, the children's festival, and of course all of the parades that were held right outside of my window. Van Vorst Park is a great community to live in. Oh, and by the way, unfortunately the Public Library is still closed due to Hurricane Sandy, but they are expecting that it will re-open on Monday, December 17th, for regular hours. Plus they're offering a library fine amnesty for all those who were unable to drop off their overdue books and videos. All the best and Happy Holidays Jersey City!

WHO KNEW NEWARK AVE HAD IT SO GOOD!!

So I've been recently working with clients in search of medical office space near Christ Hospital. I met a really nice doctor from New Brunswick who is interested in expanding his practice into Jersey City. His goal is to open a Specialty Pediatrics Practice somewhere near Christ Hospital. Well anyone in Commercial Real Estate here in Jersey City knows that 550 Newark Avenue is a highly sought after location but who can really find space in that building??? So I showed him this great little space at 646 Newark Avenue across from the Court House. Just steps away from this fantastic new dental office. The space was previously used as a day care but it may have been originally opened as a doctor's office because it was set up with examination rooms and all. The space also had a huge yard in the back equipped with a child friendly play area. While there on Newark, I was struck by the recent development in the area. The City has finally gotten around to finishing up the sidewalks near 595 Newark Avenue and installed new Parking Meters "...as if we needed any more of these.." But it looks nice. Well, as I was saying my goodbye's and closing the gate on the Doctor's office I was approached by a Ricky Bagolie who recently opened his new law practice on Newark Avenue. The exact address is 648 Newark Avenue, Jersey City, NJ and If you've been in Real Estate for any time here in Jersey City you would have remembered this was the old, close to delapitating, title building....Well Bagolie has partnered up with Alan Friedman and Michael Sluka (Keith Sluka's brother - local mortgage broker) and has renovated that old Title building into something quite spectacular!!! Bagolie invited me inside to check it out and I was awestruck by the great work they did in renovating the place... They are specifically personal injury attorney's but he wanted me to get the word out that he has extra office space located in his new building that he's willing to lease out to attorney's for a negotiable rate. Feel free to contact me and I can send you some photos...The place is magnificent! Bagolie also informed me that he's considering starting up a Newark Avenue Business Association, much like the ones in Downtown Jersey City, this could potentially be great for business owners!

LIBERTY HARBOR NORTH

HERE'S AN INTERESTING ARTICLE I FOUND TODAY.... Liberty Harbor North Inc., a developer of waterfront property opposite Manhattan in Jersey City, New Jersey, filed for bankruptcy to resolve a $21 million court judgment related to the urban-renewal project. Company President Peter Mocco, a former mayor of neighboring North Bergen, put three companies affiliated with the Liberty Harbor community into bankruptcy to settle a legal dispute with a former landowner. “We need the quick definitive action of the bankruptcy court to permit me to enter into a settlement,” Mocco said today in an interview. Liberty Harbor North controls land worth $350 million, the company said in court papers filed April 17 in U.S. Bankruptcy Court in Newark. The project itself is not in bankruptcy and has adequate cash flow, Mocco said. The development is an example of “new urbanism,” which relies less on cars and more on public transportation in creating a sense of community, Bob Antonicello, executive director of the Jersey City Redevelopment Agency, said in a telephone interview. It is monitored by more than 500 security cameras, served by two light-rail stations, and sits within walking distance of PATH trains run by the Port Authority of New York & New Jersey, Mocco said.

DOWNTOWN NEIGHBORHOOD ASSOCIATION

I Recently met members and made new friends who are part of the Downtown Coalition of Neighborhood Associations here in Jersey City (DCNA). We had dinner with them at the Brightside Tavern...By the way, their French fries are amazing! And I wanted to send a shout out to Tommy owner of the Tavern.... I would suggest you e-mail them because they are very involved on civic and community concerns, which can be especially helpful after the recent storm. See below: About the DCNA: The Downtown Coalition of Neighborhood Associations (DCNA) was formed by community leaders of the Downtown district of Jersey City to use the combined strength of our respective associations to present a united front on civic and community concerns that affect the quality of life in the Downtown neighborhoods; to continue the betterment of our individual neighborhoods; to encourage the formation of more neighborhood associations in the Downtown district; and to promote harmony and understanding among all residents. DCNA member associations include the Harsimus Cove Association, the Van Vorst Park Association, the Historic Paulus Hook Association, the Hamilton Park Neighborhood Association, the Powerhouse Arts District Neighborhood Association and our newest member, the Village Neighborhood Association. For inquiries: Mike Francisco (DCNA President), newsHCA@gmail.com or Stacy Nusbaum Woods (DCNA Secretary), president@padnajc.org

Madox Rental Building

O.k. so I'm kind of upset that I missed the Brokers open house....I was busy all morning showing my client's office space. But here's the scoop on the Madox: 

Located at 198 Van Vorst Street, Madox will be an upscale new rental building in historic Paulus Hook that will represent the first residential LEED-certified building in Jersey City, N.J. The seven-story building will feature a mix of 131 studio, one-and two-bedroom rental homes, a host of upscale in-building amenities and 4,000 square feet of ground-floor retail space. Building amenities will include a keyless entry system, 24-hour doorman, state-of-the art gym, lobby lounge with library, business center and communal technology table with iPad Station, iMac and PC available for resident use and a resident’s-only lounge with children’s play area, yoga room, kitchenette, TV and more. The Madox will also offer an abundance of outdoor space with a landscaped courtyard with children’s outdoor play area, café seating and benches, two common 8th floor terraces and common roof deck with hammocks, natural gas fired BBQ, fire pit, lounges for sun bathing and magnificent views of NYC, Marina, Statue of Liberty. There will also be underground parking for residents. www.madoxapts.com