Tax Break for Short Sellers at Risk:

What is it and why is it important to the overall health of our housing market?

A short sale is when you sell your home for less than market value and the lender holding your mortgage accepts less that what you owe them.  The IRS considers this a taxable gain...the forgiveness of a portion of your debt.  But, President Bush and Congress passed a provision back in 2007 that gave homeowners an exemption on having to pay taxes on this type of transaction as a way to help the housing market emerge from the slump at that time.

So the above is the "What" and now we address why its important.  The number one headwind for the housing market are not mortgage rates (which are very, very low), its not employment (which is tight and stable), its available inventory.  There simply aren't enough single family homes available for sale.  Part of that reason is that a lot of homes are tied up in a "shadow" inventory held by banks as a result of defaulted mortgages.  Part of the reason is that many are still "under water" on their  homes...owing more than it is worth.  Short sales are a way of getting those under water homes back on the market and providing the much needed new inventory.

Although eight years have passed since the housing crisis began, some 13.4% of homeowners remain underwater, meaning they owe more than their homes are worth, according to Zillow, a real-estate information company.

Technically, the tax break expired at the end of 2014, leaving homeowners in limbo for 2015. Although it is widely expected to pass, if it weren’t renewed, homeowners who received some relief this year could now take a hit when they file their taxes next year. 

How Long it Takes to Save for a Down Payment:

Which age groups are financially fit to buy homes the fastest? Hanley Wood’s Data Studio recently used Metrostudy and Census data to find out how long it would take each generation to save up a 10 percent down payment on a home based on the median household income and median home price for each age group.

Millennials and retirees tend to save for the longest amount of time in order to put a 10 percent down on a home, according to the study. More specifically, younger millennials aged 18 to 24 – who are usually recent college graduates – will have to save the longest at an average of 8.77 years in order to save enough for a 10 percent down payment on a home costing $221,600.

Retirees aged 65 and over will take, on average, about 7.37 years to save up for a down payment on a $291,000 home.

Americans aged 45 to 54 years old – who tend to be at their top earnings power -- take the least amount of time to save up for a down payment. Still, it takes more than three-and-a-half years to save for that age group.

Here’s a breakdown of the years to save up for a down payment based on age:

• 18-24: 8.77 years (average monthly mortgage payment: $597)
• 25-34: 7.34 years (average monthly mortgage payment: $950)
• 35-44: 5.45 years (average monthly mortgage payment: $1,073)
• 45-54: 3.54 years (average monthly mortgage payment: $891)
• 55-64: 3.72 years (average monthly mortgage payment: $766)

65 and over: 7.37 years (average monthly mortgage payment: $532) 

Home Equity Returns in a Big Way:

Nearly a million U.S. homeowners came up from underwater on their home loans in the third quarter, finally owing less than their homes are worth. The nation's overall negative home equity rate fell to 13.4 percent of homeowners with a mortgage, down a full percentage point from the second quarter and from 16.9 percent a year ago, according to Zillow, the Seattle-based real estate firm. Historically, the typical negative equity rate is lower than 5 percent.

Fast-rising home prices are behind the gains. Home value gains widened in October, up 6.8 percent from October 2014. The gains had been contracting in the first half of this year. Recent price gains have reduced negative equity by a collective $60 billion in just three months. While the increase in home equity is sizable and the improvement since the worst of the housing crash dramatic, the negative equity crisis is far from over. More borrowers will now be able to refinance, but an inordinately large number are still stuck in place.

This is still one of the key reasons why inventory levels are so tight.

Housing markets with higher rates of negative equity will have fewer homes for sale, as homeowners are stuck in place. Negative equity is concentrated in lower-priced homes, so this especially hurts the first-time buyer looking to purchase those homes. The supply of homes for sale is very tight nationwide, but it is especially tight at the entry level.