For several years, you have shared your insight for the New Year, and it would be interesting to have your predictions for 1988.
The effects of the October stock market collapse have started to ripple through our economy. Interest rates for mortgages dropped significantly early in November, and they are staying relatively low. Historically, interest rates have been kept relatively low in election years as politicians try to please their constituents -- at least until the voting is over. Thus, I predict that interest rates will continue to hover around the current levels for at least six to eight months.
The true impact of the Tax Reform Act of 1986 will not be felt until April 15, when tax returns are due. But I predict that when the average taxpayer begins to analyze all of the new tax forms required for filing the 1987 tax returns, there will be a loud outcry. The stated objective of the 1986 Tax Reform Act was simplification. Clearly, that has not been met.
Single-family home sales will continue at the same rate as last year, bolstered by the reasonable mortgage rates available.
And condominium sales will continue to be slow. There is an abundance of empty units on the market, and more people are becoming disenchanted with the condominium way of life. Cooperative sales, on the other hand, will continue at an active rate, since excellent financing is still available. Indeed, I predict that more and more lenders will be entering the cooperative financing market.
On the legislative front, I doubt that Congress will enact any new consumer protection laws this year. However, state and local jurisdictions are continuing to monitor innovative legislation, and Takoma Park recently enacted a right of first refusal giving tenants, under certain circumstances, the right to purchase the property in which they live. This law has worked successfully in the District, and jurisdictions in surrounding areas will begin to look closely at tenant rights. However, landlords of single family homes in the District continue to feel frustrated by tenant laws, and the District council will take a hard look at the impact of tenant protection laws near the end of this year.
Condominium conversions, which have been extremely slow over the past few years, will begin to increase -- especially when landlords realize that under the new tax laws they can effectively (and creatively) sell their rental properties to existing tenants.
Finally, we will continue to see a revival of the like-kind, tax-free "sale and exchange" concept. Under this approach, an owner of investment property can exchange property for another property rather than sell and be hit with the tax on ordinary income.
Benny L. Kass is a Washington attorney. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed, stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to that address.