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NEW TAX PROPOSALS WILL BOOST ECONOMY THROUGH REAL ESTATE, EXPERT SAYS

NEW TAX PROPOSALS WILL BOOST ECONOMY THROUGH REAL ESTATE, EXPERT SAYS
 President's State of the Union Message
 Bodes Well For First-Time Home Buyers
 LOS ANGELES, Jan. 30 /PRNewswire/ -- President Bush's plans to allow passive losses on real estate to offset taxable income will cause millions of dollars to be reinvested into the economy, with benefits that more than offset the loss in tax revenues, according to a leading real estate finance expert.
 "Investors will have extra cash to pay down existing debt, thus bringing more money into the lending stream and avoiding foreclosures," predicted Stan Ross, managing partner of Kenneth Leventhal & Company. "Some of that money could also go toward housing construction. All of this is possible now that President Bush has declared the banking credit crunch must end," he added, echoing the President's call to encourage investment by clearing away obstacles to growth.
 Ross applauded the President's plans to allow a $5,000 tax credit and penalty-free withdrawals of IRAs for first-time home buyers saying that would go a long way toward easing the housing affordability crisis.
 He also called on Congress to support the President's plan to extend the authorization for mortgage revenue bonds to make housing more affordable for low and moderate income families and to establish 50 federal enterprise zones. "Tax credits for businesses opening or expanding in enterprise zones will be substantial," said Ross. "These tax incentives will lure builders into the cities and help buyers that don't qualify for conventional financing to realize the dream of owning a home."
 Ross said bankers have a social responsibility to lend to first-time buyers and the government should support their efforts by encouraging more investment in mortgage securities.
 "Securitization is the key to bringing more liquidity into the system so that real estate can quicken the recovery from the recession," he said. "More states need to follow the example of California that just announced a $400 million program to steer the state's short-term investments into a pool that would buy residential mortgages on the secondary market."
 According to Ross, the Administration's support of the housing industry should help attract new sources of capital. "Wall Street needs to put more of an emphasis on mortgage securities especially since institutional investors are going into the market," he added, pointing to the recent announcement by the California Public Employees Retirement System to invest $225 million developing single-family homes nationwide.
 Ross said the President's proposed cut in the capital gains tax will not have a near-term effect on real estate. Investors will wait and see whether it is enacted into law and the effective date before deciding whether to sell properties. A key concern will be the tax rate applied to the recapture of prior depreciation claimed. But long-term it will encourage new investment and provide greater liquidity in the nation's real estate markets.
 He added, it will take the markets about a year to realize the full effect of the recent lending cuts from the Fed, but that the economy should start to bounce back by the third quarter and housing starts will improve from their lowest level since World War II.
 "Home buyers are in the driver's seat now, and they need to shop around for the best rates and points on a loan," he advised.
 Kenneth Leventhal & Company is the country's 10th largest accounting firm known for its expertise in real estate and financial services. It has offices in 13 cities and is affiliated internationally with Clark Kenneth Leventhal.
 -0- 1/30/92
 /CONTACT: Francie Murphy of Casey & Sayre, 310-457-3676, for Kenneth Leventhal & Company/ CO: Kenneth Leventhal & Company ST: California IN: FIN SU:


CH -- LA010 -- 5133 01/30/92 10:01 EST
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Date:Jan 30, 1992
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