Entry-Level Housing Affordability stands at 25 percent in California.  The percentage of households that could afford to buy an entry-level home in California stood at 25 percent in the first quarter of 2007, compared with 26 percent for the same period a year ago, according to the CALIFORNIA ASSOCIATION OF REALTORS® First-time Buyer Housing Affordability Index (FTB-HAI).  The minimum household income needed to purchase an entry-level home at $480,670 in California in the first quarter of 2007 was $96,910, based on an adjustable interest rate of 6.3 percent assuming a 10 percent down payment.  First-time buyers typically purchase a home equal to 85 percent of the prevailing median price.  The monthly payment including taxes and insurance was $3,230 for the first quarter of 2007.

The High Desert region, at 44 percent, was the most affordable in the state, followed by the Sacramento region at 43 percent.  Santa Barbara was the least affordable region in the state at 12 percent, followed by the Monterey region at 19 percent.

The Internal Revenue Service (IRS) has announced that it is implementing an increased focus on audits of S Corporations.  Three issues will draw particular scrutiny: compliance with payroll tax requirements; accuracy of compensation and dividend allocations for owner-employees and property independent contractor classification.

The IRS is concerned that self-employed individuals who both own and are employees of their own S corporation businesses are underpaying themselves (and thus reducing their payroll taxes) on the compensation side of the equation.  Conversely, the IRS believes that individuals are over-compensating themselves in distributions of dividends, which are taxed at reduced rates and are not subject to payroll taxes.

Realtors, unlike most other small business categories, enjoy the protection of a statute that governs the classification of workers as independent contractors.  Sales agents will be treated as independent contractors so long as they have a valid real estate license and a written agreement with the broker indicating that they are treated as independent contractors.  In addition (or nearly all) of their compensation must be drawn as commission based on sales and not on hours worked.

The Treasury has increased allowances for Health Saving Accounts.  Health Savings Accounts (HSAs) were created to allow consumers, particularly the self-employed and small businesses, to acquire health insurance.  HSAs are tax-free savings accounts that supplement the health insurance benefits of individuals and families who purchase insurance plans with high deductibles.

Treasury has announced that during 2007, individuals may put as much as $2,850 into an HSA; families may deposit as much as $5,650.  In 2008, these amounts increase to $2,900 and $5,800, respectively.  During 2008, the underlying health insurance must have a minimum deductible of $1,000 and a maximum of $5,600 (individual) and $2,200 minimum and $11,200 maximum for a family.

The Commercial Real Estate Market has kept the economy perking during the housing slowdown according to the National Association of Industrial and Office Properties.

A recent study conducted by Dr. Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University, for NAIOP Research Foundation found that spending related to commercial real estate added $498.4 billion to the GDP in 2005.  By comparison, the federal government’s contribution that year was $498.8 billion.

Spending on commercial real estate included:

Ø  $228.93 billion on soft costs (architects, engineering, marketing, legal, management), site development and tenant improvements

Ø  $265.9 billion on the hard costs, or actual construction outlays

Ø  $3.6 billion on maintenance

California topped the list of leading states for Commercial Construction Spending. In terms of individual sectors, Texas ranked first for industrial spending, while California led the states in spending for office, industrial, warehouse, and retail categories.