Four Months of Home Price Increases

Standard and Poor’s last week announced that their Case-Shiller home price index has recorded a fourth consecutive month of home price increases. Nationally, home prices July/June increased by 0.9 percent following the June/May increase of 1.2 percent. It was even stronger in Chicago, where the prices July/June were up 1.9 percent following the June/May increase of 3.2 percent.

The FHFA (Federal Housing Finance Agency) also recently reported a fourth month of gains as well, showing nationally home prices July/June increased by 0.8 percent.   

I sure hope that the lucky timing of my (June 10, 2011) holds true, and we continue with stable to slowly rising home prices going forward.

I do believe we’ll remain in a buyer’s market for quite some time. In Lake Forest and Lake Bluff, while sales activity has certainly increased compared to last year, new listings continue to emerge at a faster rate than what would just replace what sold.

Watching activity (detached single family) over the past 30 days in Lake Forest there were 41 new listings, 12 closings, and 9 expired, so net 20 were added to inventory. In the past 30 days in Lake Bluff, there were 30 new listings, 12 closings, and 3 expired, so net 15 listings were added to inventory. There are likely a good number of “pent up” potential sellers that will become listings once the inventory and sales pace further improves.

I continue to hold my opinion that the majority of new and existing listings in Lake Forest and Lake Bluff are overpriced and thus not competitive with “the real market” of attractively/correctly priced homes. My (May 27, 2011) further details this. The feeling about the real estate activity level really depends on just who’s door you knock on.

Buyers knocking in Lake Bluff (detached single family, closed with contract date 7/1/2011 or after) have clearly been more impressed with correctly priced and newer listings, as 10 of the 16 closings had a market time of fewer than 3 months and 6 of these involved listings of less than a single month! Only 3 of the 16 closings were on the market over 6 months. Sellers take note.       

From time to time, I can’t resist commenting on issues outside of the real estate world.

Why are people moved by Warren Buffett’s “shocking revelation” about his “15-17 percent tax rate” and the political spin on it which eludes that the super-rich don’t pay their fair share of taxes? I think this is a lot of smoke and mirrors.

Buffett pays a 15-17 percent tax rate on his U.S. personal federal income because he only owes 15 percent on capital gains income and in his case that accounts for almost his entire income (which is, as you know, a very large figure). His corporation, Berkshire Hathaway, (where he holds his wealth as a major stockholder) pays an average tax rate of 28-30 percent.

For every dollar of Berkshire Hathaway earnings that belongs to Buffett, he retains 60 cents after federal taxes. The 60 cents retained: $1 times .71 (his share after 29 percent corporate tax) and then times .85 (his share after 15 percent capital gains tax) equals 60 cents. He pays another 5.7 cents (that’s an 8 percent tax on the 71 cents of reported income) for Nebraska state taxes. Then he also pays property taxes and sales taxes.

Buffett pays a lot in taxes, his income tax rate is high, and he owes more than he has paid. What's that? His corporation Berkshire Hathaway is currently still negotiating over the alleged $1 billion in back taxes owed to the U.S. Federal Government.

Maybe Buffett should pay what is due under the current rules before preaching for new rules. That is, unless the two are somehow related?