Brookfield Residential Property Services, an affiliate of Toronto-based Brookfield Asset Management, acquired Prudential Real Estate and Relocation Services Dec. 6. The union creates North America’s third-largest residential real estate brokerage business and the world’s second-largest relocation-services provider with assets including Brookfield Real Estate Services Inc., Royal LePage, Real Living, Via Capitale, Centract as well as Brookfield Global Relocation Services.

“This is an exciting day for our organizations,” said Graham Badun, managing partner and CEO of Brookfield Residential Property Services, announcing the transaction. “We are a strong, global company, focused on the real estate and relocation services sector in a major way.”

For Prudential Real Estate’s more than 600 affiliates operating across North America and their clients, the news means “business as usual.” Under a licensing agreement, Prudential Real Estate affiliates will continue using the Prudential brand based on the terms of their franchise agreements. Prudential Real Estate and Real Living will continue operating independently in the U.S. Likewise, Prudential Real Estate, Royal LePage and Via Capitale will operate independently in Canada.

The expanded scale of the combined businesses will ensure that the network remains at the forefront of the industry, positioned with leading-edge tools and technologies to best serve their clients.

“Brookfield Residential Property Services is a long-term builder of value and it looks to our real estate network and relocation company as integral assets to continued success,” said Earl Lee, president, International Real Estate Services. “Brookfield Asset Management, parent of Brookfield Residential Property Services, has a proud history like Prudential, is publically traded and it rivals Prudential’s size. As important, we share many of the same values and core philosophies.”

As the presidential debates start to heat up, there will be comments about the Administration’s Health Care Bill. We are again getting many questions about a possible 3.8% tax on home sales that some claim is in the bill. To answer these questions, we have decided to re-run a blog post we did last year. – The KCM Crew

A little history on the confusion

Fact Check.org explains it this way:

The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.

We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.)

The Joint Committee on Taxation, the group of nonpartisan tax experts that Congress relies on to analyze tax proposals, underscores this in a footnote on page 135 of its report on the bill. The note states: “Gross income does not include … excluded gain from the sale of a principal residence.”

And just to be sure, we checked with William Ahern, director of policy and communications for the nonprofit, pro-business Tax Foundation. “Some home sales would see a tax increase under this bill,” Ahern told us, “but it would have to be a second home or a principal residence generating [a gain of] more than $250,000 ($500,000 for a couple).”

Simple Explanation: 

The following simple explanation comes from midiShaw:

The tax will affect those sellers of real property who will be otherwise taxed on capital gains under current tax laws. Under current laws, if you sell your primary residence and meet the ‘time ‘ criteria, you are exempt up to $250,000 or $500,000 (filing individually or jointly).  Any amount realized OVER that amount is taxable under current tax schedules based on income.  As such, this new tax will apparently be added to the current capital gains tax burden IF your income is over $200,000/$250,000 (filing individually or jointly). For those selling second homes and investment properties, the tax, once again, will be applied to the amount of gain realized.

Detailed Explanation:

The following also comes from midiShaw in a comment to the above answer.

Beginning in 2013, the national health care reform legislation that became law in March, 2010, imposes a new 3.8 percent tax on certain investment income. The new tax will apply to single filers with incomes over $200,000 and married taxpayers with incomes over $250,000. Under the law, the investment tax provisions in Chapter 2A of the Internal Revenue Code are placed under the heading “Unearned Income Medicare Contribution.” In general, this new Medicare tax will apply to investment income that is subject to income tax, which includes capital gains. Pursuant to IRC Section 1402 (C)(1)(A)(iii), the investment income to which this new tax applies includes “net gain” (to the extent taken into account in computing taxable income) attributed to the disposition of property that qualifies as a capital asset under Section 1221 (capital gains), as well as gains on other property that are considered part of ordinary income.

We offer this just as an explanation.

Remember, when it comes to IRS regulations, you should check with your accountant for the most accurate and up-to-date information.

The following article appeared in Inman News.

Housing bulls sound off

By Bernice Ross
Inman News™

David Stevens, president and CEO of the Mortgage Bankers Association, is bullish on homeownership.

Stevens -- a former Long & Foster Cos. executive who stepped down as head the Federal Housing Administration (FHA) in March -- thinks there's sunshine on the horizon and it may be here sooner than anyone realizes.

A few days ago I had a chance to interview Stevens about his take on where we are in terms of a real estate recovery. I also asked if he had any good news he could share in light of the constant onslaught of bad economic news. Here's what he had to say.

1. Markets are stabilizing
According to Stevens, the real delinquency rate is down from 10 percent in the second of quarter of 2010 to 8.5 percent in the second quarter of 2011. New foreclosure starts are also down. In addition, three of the hardest-hit states for foreclosures -- Florida, Nevada and Arizona -- are also stabilizing. Furthermore, for standard fixed-rate loans, the delinquency rate was 6 percent in 2010. That number has dropped to 5 percent in 2011. As Stevens put it, "This is very close to being in 'normal' territory."

2. Many markets are experiencing real home-price growth
The problems with negative equity and declining prices are actually concentrated in a few key states. For example, 24 percent of the foreclosure activity is concentrated in Florida, and 50 percent of the foreclosure activity is in five key states. Stevens says that people who quote declines in the average price of homes nationally are using "dangerous data," since each market is different.

According to Stevens, price declines are not a national problem. "The fundamentals are better than ever." In fact, if you remove the foreclosure properties from the equation, nondistressed properties have actually experienced an increase in prices.

The challenge is consumer sentiment. People are scared to purchase now because they don't know whether they will have a job. Nevertheless, for those who are willing to purchase in this market, the opportunity has never been greater.

3. The best time ever to buy
Many people view the cost of homeownership based exclusively on the price they pay for the property. A more accurate way to judge the cost is how much you paid plus the cost of the interest that you pay over the term of the loan. To illustrate this point, assume that a buyer is going to purchase a home with a $200,000 loan. The interest rate is 4 percent. Many buyers are worried about prices falling further. If the prices were to decrease another 5 percent, that means that the property would decline in value by approximately $10,000.

If interest rates increase from 4 percent to 6 percent, the cost of waiting is extremely high. Over the life of a 30-year loan, the borrower will pay $87,937 more in additional interest. The cost of owning that home costs a whopping $77,937 more than the apparent $10,000 they might have saved by buying at the bottom of the market.

4. The coming home shortage
Stevens says that there are two primary factors that will contribute to a home shortage in the not-too-distant future. The first of these factors is the size of Generation Y (those born between 1977 and 1994), which is estimated to be approximately 80 million, or 25 percent of the U.S. population. They are now entering their prime time for starting their careers, their families, and for buying a home.

The second variable is supply. There has been virtually no new construction, despite the predicted explosion in population growth. To illustrate the severity of this problem, the 2010 census put the U.S. population at approximately 309 million. By 2050, the prediction is that the U.S. population will be 439 million. That's an increase of 130 million people in just 40 years. Regardless of whether they own or rent, they will still need housing.

5. Getting from here to there
Stevens believes the major challenges we are facing in the short term are job creation and dealing with the tight credit situation. The government-sponsored enterprises of Fannie Mae and Freddie Mac, as well as FHA, have tightened lending guidelines to such a degree that is extremely difficult for even well-qualified buyers to obtain a loan.

Furthermore, the tremendous amount of new regulation creates additional problems. For example, the Dodd-Frank bill alone adds more than 100 new regulations. Each of these regulations creates additional risk resulting in higher costs for the both the borrower and the lender. Lenders have to alter loan documents, create new systems, and retrain their people to handle these new requirements. Furthermore, the effect of "piling on" more and more regulations increases the cost to consumers, as lenders must defend themselves against additional litigation risks.

According to Stevens, real estate is now at bargain levels that we will never see again in our lifetimes. If there were ever a time to buy a home, that time is now.

Momentum In Wards Corner (click here for editorial),  several note-worthy points were made:

The city found a way to accomplish what it intended for Denby Park, even without eminent domain powers: It negotiated with property owners to buy derelict apartments so it could tear them down.

Wards Corner residents hailed the move as the beginning of change. That's what it is: a beginning. If tearing down the Denby apartments helps reduce crime, that also removes one more obstacle to investment.

Residents should keep up the pressure on current property owners to improve their buildings, especially in the neighborhood's commercial core. So should city officials.

Wards Corner's future depends on using the momentum created by the purchase of Denby Park to accelerate improvement. Don't coast now and squander that opportunity.

It will be the citizen's ultimate responsibility to see that the opportunity to redevelop Wards Corner is not squandered. This is the first major purchase of of sub-standard multi=family housing in Denby Park. This purchase will clear three acres of this socially blighted property. There are twenty-two more acres to go.

In accordance with the 2004 Wards Corner Comprehensive plan, the City is purchasing property in Denby Park.

Below is the full press release:

NORFOLK – City Council members and the Wards Corner Task Force have partnered on the need to acquire properties within the Denby Park neighborhood, specifically the Texas Streets section.   The acquisition is part of the city’s plan to build safe, healthy neighborhoods that will sustain future generations.

Total units being acquired are 68 apartment units located in seven buildings and the grounds.   The parcels include 316, 320, 324, 336, 340, 360 and 362 San Antonio Boulevard.

The acquisition price is a total of $2,686.000.   The City Council appropriated in the past two fiscal years for this purchase and those funds were made available July 1.   Additionally, the city is seeking council permission to encumber an additional $30,000 ($15,000 for each Agreement) for any related closing costs bringing the total to $2,716.000.

Of the 68 apartment units, 16 are currently occupied.  The landlord has agreed to work with the tenants to provide them with equal or better apartments within different properties he currently owns.  All of the current leases expire no later than July 2012.

As apartments become vacant or are vacant upon the City taking possession, each unit will be boarded, secured and monitored.   Once the buildings are vacant, an environmental study will be conducted and the buildings demolished.

Pertinent quotes from a Virginian-Pilot article on the property purchase:

Councilman Andy Protogyrou made the redevelopment of Wards Corner the focus of his 2010 election campaign. Although his ward does not include Denby Park, he represents much of Wards Corner.

"This is something we've waited for years to happen in the Wards Corner area. It's the beginning all of us have looked forward to," he said.

"Marcus really deserves a lot of credit for making this happen. This shows we can make things happen when we have the political will."

Crime in Denby Park has been a major factor in the deterioration of the Wards Corner commercial area, city leaders have said.

"Until we take care of the crime issue in Denby Park, we're not going to make progress in the Wards Corner commercial corridor," said Martin Thomas Jr., vice president of the Wards Corner Civic League. "So this sounds like really good news."

By now every one knows that the credit rating company, Standard and Poor, has downgraded the US credit rating from AAA TO AA+. This is the first time in US history that our credit rating has been downgraded. S & P was the only one of the three credit rating companies to downgrade.

Financial Times, in an exclusive opinion piece by Bill Miller , published today,

"The downgrade by Standard & Poor’s of US sovereign debt, from triple A to double A plus, was precipitous, wrong, and dangerous.

At best, S&P showed a stunning ignorance and disregard for the potential consequences on a fragile global financial system. The rating agency chose to take this action after the worst week in US equity markets since 2008, a week which not only saw stocks fall sharply, but which also witnessed a dangerous escalation in the European debt crisis."

US Treasury Bonds are the safest investment in the world. If our government seriously addresses our debt, Investors will continue to buy our treasury bonds and mortgage rates should continue at low levels.