Category Archives: Economy

The Famous 3.8% Real Estate Tax

There’s nothing like misinformation to cause confusion and despair.

The popular story we’ve heard circulating a lot is that—starting January 1st, 2013—anyone selling a home in this country will be hit with a new 3.8% tax to help pay for President Obama’s new healthcare plan.

Not true.

It’s true that the new tax does take effect with the start of the new year, and it’s true that some real estate sales will be subject to the tax.  But it’s not a real estate tax, per se, and many people selling homes will not have to pay the tax.

So, just what is it?

“It” is a tax on some investment income.  Interest, dividends, rent and capital gains will be subject to the tax, but only for people whose adjusted gross income is above $200,000, or couples who file jointly and whose AGI is above $250,000.

If you’d like information that makes this tax more understandable, check out this one page flyer showing the Top Ten Things You Need To Know About The Tax.

Hopefully, these facts will show that—while the tax is real and it’s about to take effect—its scope is more limited than many people have been led to believe.


Young Birmingham Area Entrepreneurs

My hat’s off to folks who actually look for work instead of groan about having no money coming in. That’s where Wyatt Trader, Brent Childree and Haden Bethea come in to the picture:
Young Entrepreneurs
These young gentlemen, who live nearby, spent the day in our neighborhood Saturday walking from house to house, offering to do odd jobs like washing cars, raking leaves and general clean-up. When they got to our place, they scored two cars to wash:
Car Wash
A mutually beneficial arrangement for all involved: Cash for some young people needing it, and clean cars for us!


Cam Ward’s Shelby Co. Economic Update

We just never know who’s going to walk in the door around here.  But I’m not complaining!

It’s always enjoyable and educational to sit and talk with Republican State Rep. Cam Ward, who is a candidate for the Alabama State Senate.

Most Shelby Co. and Birmingham area civic, business and legislative leaders know Cam well, in part, for his track record as a State Representative.  He’s also Executive Director of Alabaster’s Industrial Development Board.

With so many jitters about the national economy, what’s Cam’s take on the economy closer to home here in the Shelby Co. and Birmingham area?

That’s one of the questions we put to Cam, who’s the guest in our latest netcast.

Click the player just below to listen now…

…or click here to download.

We hope you enjoy … and thanks, Cam, for stopping by!

David Black

Encouraging Signs For The Real Estate Market?

Maybe things are getting better.

Pending sales of homes in the U.S. rose in June for the fifth straight month, according to the National Association of Realtors.

For the first time in five years, sales of homes have risen for three months in a row, according to NAR.  Sellers pricing their properties attractively, low mortgage rates and the $8,000 tax credit for first-time home buyers are getting credit for the rise.

New sales statistics give reason to be optimistic about the real estate market.

New sales statistics give reason to be optimistic about the real estate market.

For a number of market analysts, this trend is better than expected, and gives reason to believe the real estate market will continue to improve.

In the North Shelby county/Hoover area, 787 properties are for sale as August gets underway, according to the Birmingham Multiple Listing System.  391 properties are for sale in the Alabaster, Maylene and Saginaw areas, while 505 are for sale in the Shelby county portions of the Helena and Pelham areas.

Here in the Birmingham and Shelby county area, you can still get quite a deal on a mortgage.  30-year fixed rates have actually slipped some from a week ago.  With good credit, you can get a loan in the very low five percent range, while 15-year fixed rates continue to hover between 4.5 and 5%…


Buying Real Estate? History Can Help…

When investing in my first mutual fund years ago, I was given the following advice: If you plan on needing this money within five years, you’d be better off putting it in a low risk investment such as a CD or, perhaps, a money market account. With the stock market going up and down constantly, that made good sense to me.

The same can be said for investing in real estate. When deciding to buy a home, if you don’t plan on staying there for at least five years, you may be better off renting. In spite of the recent market swings, real estate can still be a sound investment. All you really need is a bit of common sense:

  • Don’t overextend yourself
  • Know that your purchase is a good value
  • Understand that, in time, values will begin to appreciate once again.

    This advice is nothing new. It’s the same in any market. Once you begin to speculate and/or overextend yourself, you become vulnerable to conditions you have no control over.

    The past few years have been like another gold rush. People were speculating that property values would increase so quickly that it made sense to borrow 100% or even 103% of a property’s value. These folks were sure they would build equity quickly. The lenders, too, were sure that this would happen, and felt comfortable lending money to high risk borrowers. In reality, no one had a crystal ball.

    Yes, hindsight is 20-20. Remember when a 20% down payment was required to buy a home? Lenders had good collateral, and borrowers were less likely to take risky chances with their own hard earned savings. People would save for several years in order to make a good down payment on their home. And over the years, as they upgraded, their down payment was increasingly more substantial, as they hadn’t used up their equity, paying off other debts.

    Sometimes it really pays to look back in history and see what works and what doesn’t.


  • BusinessWeek: Alabaster is Alabama’s Top Suburb

    Where’s a good place to live in Alabama?

    Walking trails like this one in Alabasters Lake Forest neighborhood help provide the quality of life Shelby Co. residents enjoy.

    Walking trails like this one in Alabaster's Lake Forest neighborhood help provide the quality of life Shelby Co. residents enjoy.

    We already know Shelby County is tough to beat.  But now, BusinessWeek magazine says Alabaster is the state’s most affordable suburb.

    BusinessWeek determines which city in each state gets top honors by considering housing prices, crime, education, the economy, commute time and quality of life.

    According to the magazine, Alabaster’s median household income stands at $69,443, the unemployment rate at 2.3% and the area enjoys an average commute time of 30 minutes.  Not bad…

    Slowly but surely, the word continues to get out that Shelby county, Alabama is a great place to call home!


    Recession in Shelby County? Hmmm…

    Are folks cutting back on spending?  Judge for yourself:

    Shelby County's Colonial Promenade Shopping Center in Alabaster...

    Jittery economy? Maybe, but at least on Saturday evenings, the Colonial Promenade Shopping Center can be a busy place.

    Money seems to be changing hands without too much difficulty at Alabaster’s Colonial Promenade. With the AmStar movie theaters, four restaurants and two ice cream places within walking distance of where I took this picture, parking spaces wind up at a premium some times.

    The week before, Colleen and I found waits of over an hour at a couple of restaurants at the Promenade. We finally had to drive north into Hoover. With scenes like these, I’d have to say that central Alabama’s economy could be in a lot worse shape!


    2008 Home Sales: Facing The Challenge

    The latest numbers for home sales in the Shelby county and Birmingham area confirm that 2008 saw a significant downward slide in the market.  A report by the Birmingham Association of Realtors shows home sales down by 29% for the year, compared to 2007.

    Average prices slipped by 5%, and the average number of days homes stayed on the market stood at 100 for 2008, up from 96 in 2007.  Home sales for December, 2008 totaled 798, which is down by 32% compared to December, 2007.

    Looking at Home Sales in Shelby County for 2009

    While 2008 home sales in Birmingham and Shelby County, Alabama dropped 29% compared to the year before, inventory continues to drop, and experts say the market remains poised to make a significant improvement.

    It’s interesting to compare these statistics with other markets.  While home values in Birmingham lost 5%, prices dropped closer to 11% when averaged nationally, and 32% in California.  So, as we have stated before, while our local market does wind up seeing most of the same trends that occur elsewhere in the country, the undulations in Birmingham and Shelby county home sales are typically nowhere near as extreme.  And for that, we can be thankful.

    While our local market numbers aren’t what homeowners or people in the industry want to see, there is reason to be optimistic that home sales will pick back up.  As people knowledgeable about real estate market trends are well known for saying, it’s only a matter of time.

    Negative news-satured owners are facing fear about selling their homes.  A good way to counter that is by obtaining expert information about whats happening with the market in your local area.

    Negative news-saturated owners are facing fear about selling their homes. A good way to counter that is by obtaining expert information about what's happening with the market right here in Shelby county.

    With our climate of 24-hour negative news these days, a number of homeowners who would like to think about selling are having to deal with fear.   You may be uneasy, wondering how long it will take to sell your home.  And then there’s the question of whether you might wind up with as much money in your pocket as you’ve been hoping.  And if a foreclosure pops up in your neighborhood, what then?  Would you wind up feeling even more uneasy about selling?  So, what to do?

    Look carefully at homes that are selling in the area, and those that are not selling.  What’s the difference?  Price is certainly a huge consideration, but so is appearance.  A third factor—that is making more and more difference in whether a home sells these days—is how it’s marketed.  Not all homes for sale get the same exposure.

    The fact that homes continue to sell—even in the middle of the constant barrage of negative news—clearly demonstrates that the local market continues to be healthier than many people realize.

    Here’s another reason to feel that better times are ahead:  Inventory—the number of homes for sale—fell by 19% during 2008.  At the end of the year, there were 10,201 homes for sale, compared to 12,642 at the end of 2007.  If that trend continues, then it’s safe to conclude that the ‘Buyer’s Market’ is beginning to shift more back into balance.

    If you’ve been thinking of selling your home, but are perplexed or somewhat uneasy about the current market and your prospects to sell, there’s an easy solution:  Give us a call.  We will be glad to take a close look at the history and trends of home sales, targeted to your neighborhood.  We’ll then be able to present you with a projection of how long your home might need to sell, and at what price a buyer would consider reasonable.  This could be valuable information to help you with selling during this around-the-clock negative news era.

    Colleen and David

    “With The Full Picture, 2009 May Be Bright”

    News Headlines

    If you were an extra terrestrial planning a visit to Earth and tuned in some of the news reports before arriving, what would you think about our society, given headlines like the ones above?

    I might be tempted to keep on moving, and find another place to visit, where life doesn’t appear to be so gloomy.

    As we start 2009, we have some big choices to make. How prosperous do we want the year to be? But more important … how hard are we willing to actually work to achieve that goal? Or will we choose instead to live more in accordance with the negative portrayals and not even try to make it a positive year?

    I find it interesting to see the contrasts in views about our economy right now. Quite a few of the people we know and work with here in the Shelby county/Birmingham area are remarkably upbeat. That optimism still manages to shine through, despite a challenging 2008 and constant pessimistic predictions so prevalent in the media about the real estate, financial markets and world markets in general.

    By the way … I didn’t make up the headlines above. I copied them from various websites during the last few months of 2008, as part of a small (and very unscientific) research project of sorts to see if the majority of stories carried any particular overall tone or slant. Does a prevailing tone come through to you? There is to me. Nope, I’m not ranting about wanting more positive or ‘happy’ news. That’s not what we need. What does bother me is that so many people in the mainstream don’t seem to be getting a very balanced perspective about such a broad array of subjects, based on what they read and hear. If they were, I don’t think we would have had people asking us questions recently like:

  • “Has the real estate business just rolled over and died?”
  • “Is it true that banks are selling foreclosed $150,000 homes for $65,000 in Shelby county?”
  • Colleen and I have wound up explaining—more than once—that, contrary to popular belief, the home sales market in Shelby county and Birmingham is still pretty healthy, despite downward trends in the area during 2008. And I think back to a few days before Christmas when The Birmingham News ran a story about a “silent” mall where holiday shoppers were a scarcity. Later that afternoon, as we passed the Galleria on I-459, we observed traffic backed up on the flyer-over ramp onto the interstate, waiting to pour in to the Galleria and Patton Creek. The newspaper wasn’t lying. But I wasn’t getting the full picture, either.

    Want to keep balance in your perspective? My suggestion is to look around and decide for yourself. There are positive developments that affect the way we live and do business, and it’s not just happy talk. But you don’t hear as much about them. I’ve heard more than one person ask recently, “who would have ever thought gas would be this cheap?” While it’s anyone’s guess as to how long oil prices will stay where they are, there is still the inescapable fact that our national economy and virtually every business and industry, large or small, are benefiting in many ways.

    So, what kind of year will 2009 turn out to be? When you listen to the talking heads and so-called ‘experts’ giving their predictions, remember that some of them just flat get it wrong sometimes. Alan Greenspan, former head of the Federal Reserve, maintained in 2002 and into the following year that there was not going to be a housing market bubble. He later admitted he was wrong. Part of getting the big picture, I think, means listening to those people, but staying careful not to put 100% confidence in everything they say.

    I think we all have a lot more ability than we typically realize to control our financial and economic prosperity and destiny, rather than just citing bad or good luck, as so many often tend to do. But we’ll only prosper by having the full picture in front of us to start with. And then there’s the work involved to make it happen. Here’s hoping your 2009 really is a prosperous one.


    Is The Birmingham “Buyer’s Market” Shifting?

    Could the “Buyer’s Market” in the Birmingham and Shelby county area be starting to shift toward becoming more balanced?  That might be happening, based on November 2008 home sales statistics released by the Birmingham Association of Realtors. And we are seeing encouraging developments about home sales in other parts of the country, too.

    Locally, the number of homes for sale in November 2008 stood at 10,994, which is about 15% below one year earlier.

    November, 2008 sales totaled 603, which is down about 49% from November, 2007.  November 2008 sales prices in the Birmingham and Shelby county markets dropped about 7% from a year earlier.  For year-to-date, the average price is about 4.5% behind 2007, according to BAR.

    The average number of days for a home to stay on the market in November, 2008, stood at 92, compared to 103 for the same month a year earlier (this figure excludes new home sales).

    When you watch TV and read the headlines, you’ll no doubt see that 49% sales drop prominently mentioned.  So, is all the news bad?  We think several of the market indications in central Alabama are actually positive, believe it or not, and there are continuing indications that other real estate markets in the country are becoming more balanced, too.

    First, there are not quite as many homes for sale as there have been, and that’s a good thing for people thinking of selling.  Buyers, meanwhile, still have boatloads of choices, so it’s certainly not as if their selections are drying up.  Second, the seven percent drop in prices helps show something we’ve mentioned before about the Birmingham and Shelby county housing market:  Fluctuations in values here do not swing as wildly, and to such extremes as they do in many other cities.  So, while values have plunged much farther in some other real estate markets, our area has remained a lot more stable.

    We received a message from a lender this week, advising that interest rates on 30-year fixed loans some buyers will be eligible to get have now fallen to 5.0%, and 15-year fixed loans have now fallen to below 5%.  All I can say is ‘wow,’ the close of 2008 and start of 2009 have to go down in the record books as one of the best times to buy a home in Birmingham and Shelby county in years.

    Clearly, the negative economic news saturating the media has caused some buyers to hold off, despite some of the most attractive pricing and interest rates ever.  But indications are starting to suggest that continuing to wait before buying may be getting riskier.  Why? 

    Nationally, home sales are starting to pick up, while inventory is declining.  That means investors and others are jumping on the really good deals, so others may miss out if they wait too long.  You can get a very interesting perspective on where real estate markets appear to be heading, by clicking below to watch the November, 2008, housing report, produced by Keller Williams Realty:

    ‘Tis the season to buy!