Spring 2011 issue of Horizons

Home Builders – continued

Observations From 2003

Predictions For 2011

RISK

A big concern in 2003 was liability and risk management. Mold caught everyone’s attention.

The issue of mold, while relevant, is not as big a concern as hyped. Today’s builders are facing continuing code changes and regulation that continue to add cost to the construction of a house. High unemployment has many concerned about committing to major purchases, like a house. However, increased sales of automobiles and electronics have provided some optimisim. The Section 179 amount has been increased to $500,000 with phase-out of $2,000,000. As with the pre-act law, the amount of the deduction is limited to the amount of taxable income from any of the taxpayer’s trades or businesses. Any excess amount is carried over indefinitely until it can be deducted. In addition, the current law allows taxpayers to elect up to $250,000 of “qualified real property” as Section 179 property. In addition, 100 percent of bonus depreciation is available for qualified assets placed in service during 2011. The internet and related technology continue to drive potential buyers to desired new home projects. Technology now allows customers to chat on-line with a company’s sales associates, select plans and custom features, while ultimately creating a price for the house. Various phone applications unique to home builders and home building are becoming mainstream. More home buying decisions will be made from the convenience of a phone or computer.

CONSUMER CONFIDENCE

The mood around the country appears to be good. It appears most, if not all, of the markets are performing well – despite a struggling economy. It is amazing how this industry is oblivious to the world around it. Present law provides that, in lieu of depreciation, a taxpayer with a sufficiently small amount of annual investment may elect to deduct up to $25,000 of the cost of qualifying property placed in service for the taxable year (Sec. 179).

DEDUCTIONS

TECHNOLOGY

According to a study released by the National Association of Realtors, nearly three out of four homebuyers log on to the Internet to search for a new home before they buy. This represents a sharp 41 percent increase from just two years ago. Even though the majority of buyers are using the Internet in their search for a home, it does not appear that they are always finding what they want online. The NAR report states that only 11 percent of these Internet shoppers find the home they ultimately buy online, while 41 percent find their home through a real estate agent.

Raise Your Expectations

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