Friday, September 16, 2011

LLR: New requirement for performance bond

LLR has announced a new requirement that must be contained by the license bond purchased by many Licensed Residential Builders. The requirement of the license bond is as follows:

“SC law allows home owners who desire to claim against the required Residential Builder licensing bond to use means other than LLR.”

According to LLR, license bonds purchased after October 31, 2011, or upon expiration of an existing bond, must contain the above language.  Historically, license bonds have not contained this provision, even though South Carolina case law requires it.

South Carolina law requires that Licensed Residential Builders post a $15,000 bond as a condition of their license, or submit an audited financial statement in lieu of the bond.

NAHB: Good and bad for housing in President's job bill

Earlier this week, the White House unveiled specific details of President Obama’s recent jobs proposal (the American Jobs Act). The proposed $447 billion legislation contains a mix of helpful and worrying proposals for the housing sector.

From a positive perspective, some of the proposals should provide a short-term boost to economic growth and job creation. Without job creation, new households cannot form and housing demand will remain weak. The legislation offers an extension and expansion for 2012 of the payroll tax cut currently in place for 2011. For 2011, the normal 6.2% payroll tax rate on covered wages was reduced to 4.2%. The proposed legislation would reduce this even further to 3.1% in 2012. Such a tax cut should help consumer spending growth, but its impacts will be diluted by ongoing household deleveraging.

The bill would also lower the employer-paid portion of payroll tax, normally also 6.2% of covered wages, to 3.1% in 2012 for the first $5 million in wages. This $5 million limit means that this benefit would be targeted to small businesses. The bill would also extend expensing for business property (buildings however do not qualify) placed in service in 2012. The bill also extends the start date of the controversial 3% withholding requirement for contractors doing work for most government agencies. The present-law effective date for this requirement is 2012, and the bill would delay this rule until 2014.

The legislation also contains some additional hiring tax credits, although economists are of mixed opinion on whether such incentives are effective in creating jobs. The bill doubles the current tax credit for hiring disabled, long-term unemployed veterans to $9,600 and creates two new hiring credits; $2,400 for hiring an short-term unemployed veteran and a $4,000 tax credit for hiring any individual who has been unemployed longer than six months.

On the spending side, the legislation provides $15 billion to purchase and refurbish vacant and foreclosed homes. The funds would be allocated by both state/local governments and the federal governments, to for-profit and non-profit developers. Homes refurbished under this program would be required to be sold at a price no higher than the total cost of acquisition and rehabilitation. The bill also provides $25 billion for school modernization and $27 billion for highway and transportation repair and improvement. All spending proposals would be subject to Davis-Bacon wage rules.

President Obama also included a set of revenue raising proposals to offset the cost of the proposed legislation. Unfortunately for the housing sector, many of the proposals would have significant negative impacts on housing. And these proposals have been offered and criticized in previous budget debates, with one even having been significantly expanded.

The largest revenue raiser is to limit the size of certain deductions and exclusions to a 28 percent rate for high-income taxpayers (single taxpayers reporting more than $200,000 in adjusted gross income (AGI) and joint filers who report more than $250,000 in AGI). In previous versions of this proposal, the change would reduce the value of the mortgage interest deduction and the real estate tax deduction. For a middle-call taxpayer who lives in a high cost area and faces a 33 marginal tax rate, the value of the housing-related tax deductions could be reduced by up to 15%, thereby producing significant tax increases. A Tax Policy Center report found that such a move could reduce housing prices in large metropolitan areas by as much as 10 percent.

However, the 28 percent cap proposal as defined by the jobs bill is even larger than previous versions. Now under the proposal, tax-exempt bonds would no longer be tax-exempt. A portion of the bond income would now be taxable for high-income taxpayers, who being a significant portion of bond buyers could produce negative impacts for state and local governments to raise funds. Among the bonds that would be affected would be tax code section 142 multifamily rental bonds and section 143 mortgage revenue bonds, which provide funds for affordable mortgage financing for homebuyers.

Moreover, the proposed 28 percent cap would also affect a number of above-the-line deductions (deductions that can be claimed by itemizers and non-itemizers), such as the adjustment for qualified moving expenses, as well as the section 199 domestic production activities deduction. The reduction of the section 199 deduction, which can reduce taxable income up to 9 percent for home builders and other construction and manufacturing businesses, is particularly troublesome in that it would single out businesses organized as pass-thru entities (such as S Corporations and LLCs) but leave C Corporations unaffected.

Additionally, the bill once again proposes increasing the tax on capital gain due to a carried interest. As we have explained before, the use of carried interest is a common practice for multifamily developers, and would result in lower property tax revenues and reduced job creation for multifamily development. The proposal would increase the tax on some multifamily rental properties from 15% to rates as high as 35%, depending on how the project is financed.

All the proposed tax increases would take effect in 2013.

Given the ongoing weakness in housing, with nearly 1.5 million jobs lost in the residential construction sector, and the fact that home building typically leads the economy out of recession, it is disappointing to see a jobs package that includes tax provisions that would weaken housing’s contribution to economic growth. On balance, the positive effects from job creation offered by some of the proposals are outweighed by the negative tax recommendations that would increase taxes on future homebuyers, current homeowners, and rental housing developers, particularly in high cost areas of the nation. Add to that policy uncertainty from the president’s promised September 19th rollout of a budget proposal for supercommittee consideration, and it is difficult to see much policy support for housing for the duration of 2011.

Wednesday, September 14, 2011

Surplus Warehouse Offers HBA of Greenville Members an Added Discount to 3-Day Sales Event

Our newest member to join the HBA of Greenville, Surplus Warehouse (A 2011 Fall Southern Home and Garden Show Exhibitor) is holding a three day SPIN THE WHEEL SALE on all Flooring, Doors, Cabinets, Windows, Tubs with everything in stock from 5 to 50 percent off on your total purchase based on your spin. This sale lasts only Thursday, Friday and Saturday, September 15, 16, and 17, 2011!

We have a massive inventory of grade ”A” merchandise & the lowest prices in town.

HBA Members: bring a copy of this blog and receive a minimum discount of 15 percent off; an exclusive offer for HBA members. (No combined discounts.) We look forward to seeing you this weekend and thank you for doing business with a member.

20 Haywood Road
Greenville, SC 29607
(Located between Haywood Road and Woodruff Road, next to Burlington Coat Factory)

(864) 297-6013

Store Hours:
8:30 am - 5:30 pm
8:30 am - 3:00 pm
Sunday Closed

Click Here for Details

Greenville News: Greenville's job market rated "favorable"

Employers in the Greenville-Mauldin-Easley metropolitan statistical area expect steady hiring in the fourth quarter, giving the regional a favorable job market stronger than much of the rest of the state.

NAHB: Where the second homes are located

A recent report by NAHB maps the percentage of second homes in the various areas of the country.

Less than five percent of its housing stock in Greenville County is second homes.  In Pickens County, 5 to 10 percent of the housing stock is second homes.  The highest percentage in the Upstate is in Oconee County, with 10 to 15 percent of its housing stock classified as second homes.  The highest percentage in the state can be found in Horry and Georgetown counties, where second homes account for more than 35 percent of the housing stock.

Click here to read the entire report at Eye On Housing.

NAHB: Less than 1 percent in South Carolina take advantage of home buyer tax credit

According to a report by NAHB's Housing Economics Department, less than one percent of South Carolina's tax payers took advantage of the home buyer tax credit that expired in April 2010. The tax credit resulted in stimulus to the housing market in South Carolina of $100 million to $200 million. The top states, clustered in the mountain region of the U.S., included Nevada and Arizona.

South Carolinians were more aggressive regarding the energy efficiency tax credit.  Four to five percent of South Carolina tax payers took advantage of the home buyer tax credit.

Using these data, the tax credit may have raised new home sales by 10% to 20% above the alternative baseline, with the range depending on how many sales were simply accelerated. But as the geographic data above indicates, these gains were likely not evenly spread across the country given the size of the tax credit as a share of local housing prices, the state share of first-time buyers, and the overall level of new home sales and building in each state.

GSA Business: Homes sales up in August

According to the Greater Greenville Association of REALTORS®, homes sales jumped 42 percent in August, compared to the same month in 2010.  This was the second consecutive monthly increase, although home sales for the year are still down about 9 percent.

Read the entire report at GSA Business by clicking here.

Monday, September 12, 2011

Labor Department targeting large home builders

According to the Associate Press, the Labor Department is investigating large U.S. homebuilders to see if they failed to pay workers the minimum wage or overtime.  A spokesman says the agency is investigating compliance with wage-and-hour laws in the homebuilding industry as part of a crackdown targeting several industries.  Click here to read the entire story at AP.