(Courtesy The Urban Institute)

A look at student loan and medical debt across the nation reveals that how much debt a person carried boils down to quite a bit — especially when it comes to race. And that debt has become one of the top five barriers to homeownership.

The Urban Institute’s study of debt — specifically, student loans and medical bills — has some illuminating data when it comes to Dallas County. (more…)

Real Estate Story

Everything’s bigger in Texas, including our ability to build wealth.

That’s according to a new study by Bankrate that surveyed the the 18 largest metro areas in the U.S. according to how strong of an environment they provide for making and saving money. Houston ranked No. 1, and Dallas ranked No. 6.

The rankings were created after consulting with experts on which factors should be considered in a conversation about wealth. Here’s what the experts told them were the biggest contributors:

  • After-tax, savable income: This is what’s left over after taxes and necessary expenses. It’s what you could sock away in an interest-bearing account.
  • The job market: Can workers find jobs at competitive wages?
  • Human capital: Can residents find educational opportunities to help advance their careers and earn more money later?
  • Access to financial services: Do people have access to financial products that allow them to invest, save and borrow efficiently?
  • The local housing market: For better or for worse, homeownership is a key way Americans build wealth. If a local housing market is struggling, it can be harder for prospective homebuyers to get a mortgage and for homeowners to accumulate equity.

Other factors considered included participation rates for retirement plans like 401(k)s, a major wealth-building tool for middle-class households. As they noted, “whether or not an employer offers one has a lot to do with the city, both in terms of culture (whether employers think it’s the right thing to do) and supply and demand.”

“If you’re in an area where the unemployment rate is very low, then the employers have to compete for you, and part of how employers compete for you is they offer benefits and they offer retirement plans,” Christian Weller, an economist at the University of Massachusetts Boston, told Bankrate. “Employers do compete on a regional level, on a city level, for talent.”

(more…)

I think my eyes are out of whack: this Rowlett home was listed at $135,000 and is now $99,900? A reader thought this looked like the home where Darlie Lynn Routier murdered her sons Damon and Devon. (She was only convicted of murdering Damon.)

Looking back at that story, the Routiers owed up to $10,000 in back taxes and $12,000 in credit card debt, were two months behind on their mortgage payments, and had just been denied a $5,000 loan by their bank. That was in 1996. Sounds just about normal for 2011.

Homeowners who owe more than $1 million on their homes are under intensified scrutiny by the IRS now. Why? Because of so much confusion over deducting the interest on those over $1 million mortgages. And you can do the math — if your mortgage is more than a million, you are likely deducting a boatload of mortgage interest so pay attention because this could mean good deduction news, something we need a whole lot more of right now. I’d say only your CPA knows for sure but that may not really be the case!

Here’s the deal — as is usual, the tax code is so dang complex everyone is confused, even the IRS themselves and those advising us, CPA’s.¬† At issue is how much interest can be deducted, and it is based on what kind of debt the homeowner holds. I will tell you that the Alternative Minimum tax can make this a moot question for many, which is frustrating.

Tax rules distinguish between two kinds of home debt. There is home acquisition debt, which is a loan used to acquire, construct or substantially improve a qualified home, and is secured by the home. This would be your mortgage.

Then there is home equity debt, which is any other kind of loan that is also secured by the home, but used to pay off credit card debt or for general consumer spending.

The controversy centers on how this was all interpreted. Some tax advisers and agents were telling clients it was acceptable to deduct all interest on a single mortgage of up to $1.1 million. Others said no,  the limit for mortgages was $1 million, but they could also deduct interest on another $100,000 (up to $100,000) in a home equity loan.

IRS said last spring acquisition loans over $1 million may also qualify as home equity indebtedness. And the taxpayer can deduct interest on the full $1.1 million, even if he has only one loan.

But throw a few re-fi’s into the mix, and the rules can get ‚Äúcomplex”. Or second homes. If a taxpayer owns several homes, say a house in upstate New York and a condominium in New York, they may also be subject to paying New York state and city income tax if they are there for more than 180 days/year.

There’s a reason why we call this blog second shelters: tax rules generally allow deductions on a first and second home, but not a third or more. Of course, most folks pop those into limited liability partnerships, especially if they are income-producing, and the entity files a tax return that flows down to the taxpayer.

And if you are thinking ha, it’s those rich SOBs again, let them pay up… think again. Many people buy in areas where home prices are not what they are in Texas, and they have no choice but to take on huge mortgages. I am also finally reading Michael Lewis’ The Big Short, which is amazing and spells out how banks wanted to over-extend loans to consumers, many of them 100% loans on, yes, million dollar properties.