Odds & ends: Alimony, neighborhood regret
Nobody likes to pay alimony to an ex-spouse. Come Jan. 1, there will be one more reason to hate alimony.
Beginning next year, the payment to a former mate will no longer be tax-deductible on your federal return, just like child support is not a write-off.
Currently, alimony is a deduction for the payer, which is usually the former couple’s highest earner. And the recipient must declare the payment as income.
But under the Tax Cuts and Jobs Act, that rule goes away. As of the first of the year, alimony is neither deductible nor reportable. In other words, just like child support, the payment will not be visible on your tax return.
What impact this will have is anyone’s guess. But some experts believe that, because they cannot afford to live in different residences, the new rules may have the unintended consequence of slowing the divorce rate: keeping the no-longer-happy couple in the same home, but living separate lives.
Other possibilities: The spouse who wants to move out of the shared house may not be able to afford to, because he or she is losing the write-off. Or there might be a mad scramble to sign the divorce papers before the end of this year.
This change in the tax code is not retroactive. However, if there is an agreement existing prior to the end of this year and it is modified sometime in the future, the law says there will no longer be a deduction.
Please note: This is not intended to be legal advice, only a heads-up. Consult a tax professional or divorce attorney for more information.
Homeowners are staying in their places longer than ever, according to the Census Bureau, further exacerbating the inventory shortage of houses for sale in many markets.
Thirty years ago, sellers remained in place for a median of six years. But in 1997, the median increased to seven years, where it remained until 2008 — the beginning of the housing meltdown and the Great Recession. Then, the median tenure started bumping up by a year every year. And the longer people stay in their homes, the less inventory is on the market.
The idea of saving for a 20 percent down payment is all but irrelevant today. Many lenders will clear would-be home buyers who have as little as 3 percent of their own money to put down, as long as they have the income to support higher monthly payments.
Of course, it’s always advantageous to put down as much money as possible, because it will lessen your monthly mortgage outlay. But if you are aiming for 20 percent, you’re going to be a renter for a long time — perhaps a full decade or more.
Based on a median national home value of $216,000, 20 percent down translates into $43,200. Consequently, a renter earning the median income won’t have enough for 20 percent for 77 months, or almost 6.5 years, according to research from HotPads, a rental-finder website.
But in 13 of the 35 largest metro areas, it could take more than a decade. And in the most expensive markets, such as Los Angeles, San Jose and San Diego, how does 22 years strike you?
The rental site also reports that members of Generation Z, who are just now entering their homebuying years, will spend about $226,000 on rent before they can become owners. That’s more than any other previous generation.
By comparison, millennials can expect to spend $202,000 on rent before buying — a far cry from baby boomers, who paid landlords “only” $148,000 on rent before buying.
You can changes houses, but you can’t change your new neighborhood. And according to research from Trulia, more than a third of movers regret where they chose to move, and would change locations if they could take a mulligan.
Trulia found that 36 percent of recent homebuyers have “neighborhood regret.” That feeling is even greater in metropolitan areas, where, based on a sample of 1,000 families who moved within the last three years, almost half of all movers are dissatisfied with their choices.
Attributes that led to regret: noise, traffic and lack of public transit. On the other hand, traits that make a neighborhood suitable are its “vibe,” low crime rates and an easier commute to work.
If you are thinking about buying, check out where you want to go first, and then look for a house in those places. Look up neighborhood photos, search for the hot shopping and dining spots and visit your top choices. Once you settle on a location, contact an agent who is an expert in that local market.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
The rental site also reports that members of Generation Z, who are just now entering their homebuying years, will spend about $226,000 on rent before they can become owners.