$8,000 Tax Credit Extension to September 30, 2010

What’s the big brouhaha about yet another extension of the $8,000 tax credit for first time homebuyers?  
Bird house Senator Harry Reid wants home buyers to have until September 30, 2010 to close escrow and receive the $8,000 tax credit. But before you go out and celebrate, understand that the only buyers this extension will help are people who already were in contract to buy a home by the April 30th deadline. The proposed extension would allow only those buyers to have until September 30th to close escrow rather than the looming deadline of June 30th. Senators Johnny Isakson, R-GA, and Christopher Dodd, D-CT, are joining Senator Reid in support of the amendment. And why not? It’s a good political move and even Senators who said they would never vote for another extension will feel pressured in an election year to get behind this move.

Will it help? Sure, in a few cases where there are delays in the closing of escrow where banks may be overwhelmed or dragging their feet on short sales or where buyers are simply not able to close soon enough.

But don’t look to the government to shore up the housing industry anymore for awhile. The housing market is like a bird flying the nest…at some point you have to find your own wings.

Bay Area Housing Reports Show Some Median Price Stability

Just to bring you up to speed on the Bay Area housing market, we’re bringing to your attention a neat little gadget that allows you to see where values are relative to a prior point in time.

The chart we’ve included is based upon data from the Federal Housing Finance Agency’s web site for the San Francisco MSA (Metropolitan Statistical Area), but you can plug in the area where you live and even compare cities.

You’ve no doubt heard of the Case-Shiller report that uses repeat sales pairs to track the median home value more accurately. Essentially they track the same house selling over a period of years. Their methodology can be read here.

Well the U.S. government also tracks repeat home sales pairs to help Freddie Mac and Fanny Mae follow the markets across the country. On their web page they have this really neat calculator where you can input what you paid for a home and it will calculate what the home should be worth today based upon the median trend.

Note for the San Francisco MSA which incorporates San Francisco down to Redwood City we’re beginning to see a leveling off of the free fall that has befell the Bay Area since June of 2006.

We expect seasonal buying and selling trends to continue to vary home prices on a monthly basis but the overall median home price trend will no doubt be relatively flat for several more years to come. Jobs will drive the housing prices in the future, and we’re still running in double digit (11%) unemployment rates in the Bay Area.

Sellers—if you are going to try and wait for prices to dramatically rise you should be prepared to sit in your home for quite a few more years. In others words, if you want to move on in life, now’s as good a time as you’ll see for awhile.

Buyers—since values will probably be flat there’s no reason to rush out and buy a home if you are worrying about missing the bottom, but remember, if interest rates rise your monthly payment will go up dramatically.

Now for the inevitable disclaimer: The information contained in this newsletter is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.

Case-Shiller study finds Bay Area Home Prices up 11.9% in February 2010

 Case-Shiller released their report on repeat sales pairs for the 20 major MSA’s (Metropolitan Statistical Areas) across the country.Arrow ride San Francisco faired rather well, climbing 11.9% over last year in February. Phoenix lost another 1.64% but faired far better than Tampa Bay, which sank another 6% over last year.

No doubt many of these areas saw sales figures buoyed by the Federal Tax stimulus plan that rebates first time home buyers up to $8,000 and resale buyers up to $6,500. Additionally, the shifting of the majority of sales from lower priced homes to a more even mix has helped raise the median price point substantially.

Limited time $18,000 combined state and federal tax credit for first time buyers!

There’s a lot of misinformation about the federal and California state tax credits which expire soon. This short article from the California Association of Realtors sums up the unique opportunity to qualify for the federal and state tax credit and get up to $18,000 in rebates.

BROUGHT TO YOU BY THE CALIFORNIA ASSOCIATION OF REALTORS

$18,000 IN COMBINED HOMEBUYER TAX CREDITS FOR A LIMITED TIME

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits.  To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive.  Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.

Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010.  Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied.  The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)).  California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)).  Other terms and restrictions apply to both tax credits.

For more information, C.A.R. offers a Homebuyer Tax Credit Chart with a side-by-side summary of the federal and California laws.  C.A.R. also offers a legal article entitled Homebuyer Tax Credit Update.

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Super Bowl XLIV brings you Belmont Home Sale Stats for January 2010

Before the Super Bowl XLIV gets started we thought we’d take a look at what happened in Belmont in January 2010.

We’re including two spreadsheets—one for this last January and to help put in perspective, the one from last January.

Most statistics across the country point to January of 2009 as the low point for the real estate market. But what are they saying? The lowest point for sales, median price or what?

Many pundits are saying that home values hit bottom in January of 2009 and in fact in many of the hardest hit areas like Phoenix that may well hold to be true. But for areas that initially fared better, indications are that the price erosion is continuing.

January 2010

Belmont January Blog

January 2009

Belmont Jan 2009

(Clicking on either chart will deliver a larger picture.) 

Looking at these two data samples, it’s easy to see that sales in Belmont are indeed up—way up. January of 2009 was simply dismal with only four sales and reflected that overall uncertainty of the future as buyers chose to sit on the sidelines and wait to see how much more prices will tumble.

SALES

This January’s sales reflect more buyers entering the market and buying homes. In January of 2009 there were 31% more listings available yet sales increased this year by 175%!

What accounted for the huge increase in homes sales? Part of it appears to be the resignation by sellers that they must take less for their homes than they had hoped for a year earlier. Note that all but five homes which sold this January not only had a price reduction but on average all received only 94% of their already reduced price.

MEDIAN PRICE

Most sellers had to lower their initial asking price by $50,000 and then accepted offers another $50,000 less than that. On a median home price of $850,000 that represents a huge disparity between what sellers (or their agents) think their home is worth, and what buyers are willing to pay.

Sales were up indeed but at deeply discounted prices. The Median home price in Belmont was $850, 000 which is about 4.7% less than January of last year. But not only can you get a home for 4.7% less than last January the home you get will be 6% larger. Another way to look at it of course is that prices have really dropped closer to 11% year-over-year.

DOM

Have the price reductions and lower asking prices helped sell homes faster? Just the opposite turns out to be true. The days it takes a seller to seller their home has almost tripled from 42 to 125.

Enjoy the game!

 Data provided from the Mulitple LIsting Service.

The information contained in this blog is educational and intended for informational purposes only. It does not constitute legal, real estate or tax advice, nor does it substitute for profesional advice.

Buyer Incentive Programs – about to phase out (part 1 of 3)

 Hour glass with dollars With the real estate landscape changing almost daily it’s admittedly hard for Real Estate Agents and Lenders to keep up with all of the new programs and limitations.  
Recently, you may have heard on the news or read in the media about the $8,000 tax credit extension for first-time homebuyers. But are you aware you may easily qualify for it and not even know?

Our guess is probably not. That’s because there hasn’t been a great deal of quality reporting on what the income threshold is to qualify; and even if you knew that, what does that translate to in terms of purchase price?

The terms and conditions are too lengthy to cover in a blog and we’d lose half of our readers if we attempted, so here’s the stuff you need to know to see if you’re in the ballpark:

First, did you know that the income threshold nearly doubled last November? You may have heard that the program was extended, but a few other goodies were also thrown in including adding a $6,500 tax credit for recurring homeowners.

Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.

What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

Are there any income limits for claiming the tax credit?
Yes. For sales occurring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.

So how much home could I buy at the maximum income levels?

The maximum purchase price is always $800k and a couple cannot make more than $225K per year.

If you’ve been looking to get into the housing market or are interested in a change in your current housing these tax incentives—a credit that does not have to be repaid and comes right off the top of your tax bill—along with historically low interest rates and home values that have dropped to levels seen back in 2000 may be just the incentive to get you to take action sooner rather than later. The government has been artificially keeping interest rates low and that along with the tax credit will soon end.

If you’d like more information were here to help. Call at (650) 508-1441 or e-mail us at infro@morganhomes.com today.

Next Blog Part 2. A look at interest rates and how they are your best friend—for now…

The information contained in this newsletter is educational and intended for informational and entertainment purposes only. It does not constitute tax or legal advice, nor does it substitute for tax or legal advice.

Belmont – Market Report for December 2009

It’s official. Belmont’s median home price dropped 9.4% last year from $920,000 in 2009 to $833,827 in 2009.

Belmont Dec 2009

(click on the graph to enlarge)

There’s not much good news in the way of these numbers which would hint that the market is improving anytime soon with the exception of the “months of inventory” (*see below).

There seems to be a pervasive attitude within the real estate community to spin statistics any way possible to portray a happy healthy market but in reality real estate is experiencing some of the most volatile years in our nation’s history. And things are not stabilizing at any appreciable rate; in fact, many indicators point to just the opposite. That doesn’t mean you should no longer consider real estate a viable investment. It just means that you need to go in with eyes wide open. The recent market corrections (and even over corrections as in the case of many areas) has opened up some opportunities which may not be seen again for years.

The government is spending millions of dollars to keep interest rates low and offering tax incentives to spur homeownership. These conditions are temporary and indeed the end of special incentives may mean things get worse before they get significantly better.

Looking at the year-end numbers for Belmont, CA we see several statistics which put in perspective the tumultuous year real estate had in 2009.

The time it takes to sell a home in Belmont increased this year from 39 days in 2008 to 56 in 2009.

The amount a seller received of their asking price dropped from 98% in 2008 to 97% in 2009.

The median sale price dropped 9.4% in 2009.

*Month’s Inventory seems to be one bright spot in a rather dark spreadsheet.

The months of inventory refers to the time it would take to sell the remaining homes listed for sale at the current sales pace. Two major factors in this are how many homes are selling each month and how many new listings are coming on the market. The lower the months inventory the fewer homes there are to choose from and price stability invariably creeps back into the market.

Last December the three month moving average for Belmont stood at 5.47 months and this December that had fallen to only 3.61 months.

There were slightly fewer listings this year (10) and 18 more sales which accounted for this favorable statistic.

Read our next post on the buying opportunity window which is closing fast.

Mid Peninsula Housing Trends–2009

What happened in 2009 and what might be in store for 2010?

THE PAST2010 Key

The median price in San Mateo County ended the year at $678,750 which is a dramatic drop from 2008’s year-end median price of $795,000. It continued to drop precipitously throughout the beginning of 2009, though it appears that January of 2009 was its lowest level when the median price reached $553,750—the median price has not been that low since 2000.

It wasn’t until April of 2009 that the median price reached the $600,000’s and the last four month have seen small but steady increases culminating in December’s median price of $750,000. But don’t read too much into these increases. Much of the median price increase is a result of larger homes selling do to the low interest rates and higher conforming limits.

Belmont and much of the mid-peninsula were less affected by the declines. The median price in Belmont dropped from $920,000 in 2008 to $833,725 in 2009 (9.4%). There are several factors which contributed to mid-peninsula cities faring better in declining markets.

THE BACK STORY

Beginning around 2001, many first time buyers entered the market with very little cash and qualified for adjustable teaser rate loans at an artificially low interest rate. Zero down financing meant that that if prices were to drop, they’d be in a negative equity position, making it impossible to refinance out of their adjustable loan. When the banks allowed people to qualify for a loan based at the artificially low teaser rate, when rates adjusted many could no longer make the minimum payment. Without the ability to refinance into a new loan, they were forced into foreclosure.

There are far fewer entry level homes in many of the mid-peninsula communities (Redwood City excepted). Therefore, these cities were spared the bulk of the foreclosures and resulting price declines. Furthermore, many people in these communities have ample equity from previous home sales and were able to refinance, or sit on the sidelines and avoid a distress sale.

THE FUTURE

We won’t pretend to have a crystal ball, so we’re not going out on a limb to try and predict the future. The real estate landscape has changed dramatically in the last several years and how it will shake out is anyone’s guess. But what we imagine could be a probability is that in 2010 will see much more of the same. We expect the record number of foreclosures which have been temporarily withheld from the market to be released and continue to put downward pressure on prices—especially in areas which have yet to be affected. Interest rates are sure to climb above their historical low levels making the cost of home ownership rise. This could easily offset any momentum which could otherwise spur normal home sales. Investors will continue to snap up good deals on distressed properties causing the number of sales to increase, but the median price to decrease, or stay flat. In fact, we wouldn’t be surprised to see a period of flat home prices for many years before any appreciable increase. People will first have to return to the job market before they will consider buying a home. Frustratingly, home sales have a huge effect on creating jobs so it’s easy to see why the government wants so desperately to have people buy a home (and extended the $8,000 tax credit). Once more people are being hired than fired consumer confidence will begin to slowly return. Folks will invariably reenter the housing market but at a less frenetic pace. Lasting memories of the “Great Recession” will haunt many homebuyers; and with higher interest rates and the days of easy money gone, it will be harder for prices to climb at rates seen in the first decade of the new millennium.

Don’t forget you can always check out the stats for a city near you on our web page.

Peninsula home values continue to slide, but slower.

We thought we'd update this graph depicting the median price in several peninsula cities. Note that while in Q4 of 2007 the median price in Menlo Park was still rising, it had started to fall off dramatically in Daly City. Prices appear to have hit bottom–for now. The real estate landscape has changed so dramatically in the last few years that everything we knew about home values (and recoveries) needs to be reexamined. Could we be in for another double dip? Knowbody knows for for sure–one way of the other. It's safe to say that at some point a recovery will happen and next time it might pay to watch what is going on in other cities. Daly City seems to ge a good barometer as to where the market may he headed…

 

Belmont and the Bay Area Peninsula Housing Downturn

If you’re wondering where the housing downturn is headed in Belmont you can get a good indication by these two snap shots taken for the month of March 2007 and 2009.

We use 2007 as a benchmark since it was the last year where the impact of the housing crises had not yet been realized in our market.

Here are some startling yet revealing statistics:

The far right column of this chart says it all. Every indicator in red illustrates a deterioration of the seller’s market which has prevailed for so long.

You may notice that even though larger homes sold in 2009 the median price still dropped $161,500 in 2009. Adjusting for this, the real median price drop is actually $252,850 or 26%.

Today, on average it will take almost three times as long to sell a home in Belmont; when you do sell you are likely to receive under you asking price. In fact statistically you no longer have any chance of getting over your asking price and the odds of getting less than your asking price has increased by 50%. Sellers now receive on average only 96% of what they ask for their home compared to over 103% in 2007. In real dollars that translates into a swing of $52,000.

In the end, this much anticipated market correction will produce a more stable real estate market. Affordability is increasing and eventually sales will increase as buyers feel more optimistic about the future, including job security and housing stability.

Considering the drop in value we are experiencing, for sellers who are debating a moving out of the area, sooner rather than later will probably produce a better result. In all likelihood it will be many years before inflation drives price points back to levels seen in 2007.

A down market is typically an attractive time for sellers who are thinking of a move up. The logic behind this is a more expensive home is less in real dollars–and also saves you thousands of dollars in property taxes over the life of your ownership. Our current market also includes attractive Interest rates that are at historic lows, though Jumbo loans are not enjoying the full benefit of the government’s intervention.

Buyers who have stable jobs and are planning to live in their first home for five years or more are benefitting the most from the current conditions. Prices are at a low not seen in years, interest rates are at historic lows, the government is paying them $8,000 to buy a home this year, multiple offers are for the most part non-existent and the high inventory levels means there are a lot of homes to choose from.

In every market, there are opportunities. If you would like advice on how to make the most of our current economic climate give us a call at (650) 508-1441.

*Data retreived from the MLS

The information contained in this post is educational and intended for informational purposes only. It does not constitute legal or tax advice, nor does it substitute for legal or tax advice.