It’s a cliché to think of success as one step forward and two steps backward, but this overly-used saying simply describes the current state of the real estate market. Although homes are for sale in all metropolitan areas, the average home price has decreased, according to a piece in The Wall Street Journal. While minor declines have been seen over the past year, the 1.3-percent decrease from October to September is cause for concern and contradicts with the recovery of retail and manufacturing industries.

Earlier this year, the housing market appeared to be in a state of recovery: the average home price had increased slightly – but not too much – while sales were up. But the WSJ isn’t the harbinger of bad news; such a drop was predicted over the summer. And, while this news applies mainly to homeowners, what about commercial real estate’s notable recovery?

The points contributing to this decline, as expressed in the WSJ piece, include:

• The job market correlates with housing. When job growth is slow (unemployment is currently 9.8 percent), housing is too risky of an investment.
• The tax credit for first-time homebuyers expired and, as of April, the amount of sales dropped, taking this figure back to early 2010 numbers.
• 20 metropolitan areas saw declines, with prices in Las Vegas and Cleveland dipping so low they’re back to 2000 levels. Las Vegas real estate, as we discussed months earlier, has a high percentage of foreclosures, which influence the average price.
• As seen in Las Vegas, foreclosures still make up a significant amount of home sales – about 30 percent – and, as foreclosures and short sales go for less than average, they bring the price down.
• Mortgage rates are rising, and current homeowners are stuck with underwater mortgages. This leads homeowners to wonder, “Why sell my property for less than when I purchased it?”

The First Time Homebuyers Credit, used from 2008 to 2010, motivated many to purchase their first homes. Although this tax credit expired earlier this year, new homebuyers can still claim it for last year or put it on their 2010 returns, according to a piece in the Orange County Register. The article, which offers some tips from H&R Block, reminds us that the 2010 tax season is not that far off. And, considering only about four months are left before the deadline, getting started now gives you more time to figure out just what on your new home can be deducted.

The Register piece offers these suggestions:

• Remember the First Time Homebuyers Credit. If you purchased your first home before the tax credit expired, you have two options to receive a tax refund: Amend your 2009 return to receive the money faster or add it to your 2010 return.
• Repay the 2008 First Time Home Buyers Credit.
• Consider going green. You’ve been hearing about this for the past few years: energy-efficient improvements to the exterior of your home are tax-deductable. As the article explains, new windows and doors, insulation, roofing, HVAC systems, and non-solar water heaters that follow specific green guidelines are eligible. If you haven’t already, contact a company for replacement windows and doors to learn more about installing such products. Generally, double pane or insulated glass are the most environmentally-friendly.
• Consider mortgage debt forgiveness. Many foreclosed on their homes over the past year and, as a result, have a remaining mortgage debt. As the article explains, this amount can be excluded from your primary taxable income, just as long as it does not exceed $2 million.
• Examine and deduct rental expenses. Mainly applying to those who own real estate, this tax deduction involves tallying and deducting any expenses from renting a property, such as repairs and depreciation.

Some say it’s a buyer’s market, and for the present, this assertion is accurate. Average home prices are lower than they were four years ago, and many foreclosures and short sales are still available. Unfortunately, as the average price for a home is lower, homeowners are stuck with underwater mortgages and, as a result, are reluctant to sell.

Homes are still being sold, however, according to an article in the Los Angeles Times, and many properties are going to first-time buyers. Nevertheless, if you’re looking for a home or planning to buy one, the Times article gives some general tips:
• Examine many homes before deciding on one.
• Finance in advance.
• Research and know what you want before looking.

The Times piece gives more details, but being prepared and looking with direction are the two main points. Another aspect of home buying is highlighted by Matthew M. Wallace in an article in The Times Herald. Essentially, what you see isn’t always what you get is the gist of Wallace’s piece. Making sure an advertisement is accurate can be done through surveying, in particular boundary surveying.

All areas have surveying companies that, through mapping and research, determine the boundaries of a potential property. This is necessary, as a property might be smaller than advertised. Wallace explains:

According to his property description, my client had 450 feet of frontage on the road, which amounted to about 27 acres. When he had his stake survey done, he discovered that he had less than 300 feet of frontage. He found his township section was a short section. At 5,120 feet, it was 160 feet short of a 5,280 foot mile.

Wallace explains further that the initial survey, called a mortgage survey, doesn’t give buyers an entire picture; a mortgage survey is a cursory review of the property done before financing. As boundary disputes are common – and something new to first-time buyers – having a proper survey will quickly resolve any in the future.