Is a Housing Shortage on the Horizon???

Some experts are saying that the next big real estate problem could be a shortage of homes.

Only 672,000 new homes were started in April. That’s less than half the number needed to meet the country’s average population growth.

In the past, an average of more than 1.3 million households have been built each year, creating demand for 1.5 million new homes. In 2009, only 398,000 new households were formed, according to the Census Bureau.

"The decline in household formation is artificial," says James Gaines, a real estate economist with Texas A&M. "The young are moving in with their parents. There's even doubling up among working-class people. There's a pent-up demand coming if and when the economy recovers."

Some economists believe this analysis fails to take into account the changing economy or the large inventory of vacant properties. But Gaines and others say these factors are unlikely to significantly drive down demand.

Source: CNNMoney.com, Les Christie (06/15/2010)

House Hunting? 5 Things to Keep in Mind....

1. Expect stiff competition for some homes. There still seems to be an abundance of buyers and homes for sale are still receiving multiple offers. In most areas homes are selling on average at or just above (101-103%) of asking price. Bottom line is expect some competition and be proactive!

2. Getting a loan may be more complicated and time-consuming than you expect. With all of the questionable lending in recent years underwriters are being VERY cautious these days. Tax returns, pay stubs, verification of employment, and credit checks right before funds are drawn are not uncommon. Be VERY careful in escrow not to make any large purchases and do your homework ahead of time - GET PRE-APPROVED.

3. Buyers, be prepared to try, try again. It can be extremely frustrating for buyers right now. It feels as though foreclosure banks and short-sale servicers are holding all the cards and buyers are forced to play by their rules. Be patient, don't get emotionally attached to any one house, and be persistent. There are great deals to be had if you can survive the journey.

4. The appraisal process can throw a monkey wrench into a sale. Appraisals seem to be coming in lower than usual, possibly from increased scrutiny and the fear that lenders will crack down on any appraiser that causes them to lend more than the home is worth. If the home appraises at or above the offered price then everybody is happy. But if it comes in below the offered price then renegotiation must take place until funds are conceded to the appraised value.

5. Completing a "short sale" can be a hassle. Although programs like H.A.F.A. seem to be helping, the short sale process can still take months (depending on the servicer). There are typically savings to be had if one can stomach the ride and, in my opinion, short sales are worth the wait.

If you have any questions in regards to any of the above then I'd be happy to discuss things with you further. Please contact me anytime at tcrekevin@gmail.com with any questions or concerns.

High Level of Pending Home Sales Continues

Pending home sales are at the highest level since last October when the index reached 112.4 and first-time buyers were rushing to beat the initial deadline for the tax credit. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said this second round of surging sales from the tax credit extension looks as strong as the original tax credit. “There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension. But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales,” he said. “The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”

Some good signs for a change....

Existing-home sales rose again in April with buyers motivated by the tax credit, improving consumer confidence and favorable affordability conditions, according to the latest survey. Existing-home sales increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March. Lawrence Yun, NAR chief economist, said the gain was widely anticipated. “The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” he said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low.”

Home appraisals still fraught with uncertainty despite new code of conduct

Last year, the Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and the New York State General Attorney created an agreement titled the Home Valuation Code of Conduct (HVCC), which prohibits lenders, mortgage brokers, and real estate agents from selecting and having any “substantive” communication with a home appraiser. HVCC was created to protect consumers against fraudulent appraisals, which some industry experts believe was a contributing factor to inflated home values. However, many lenders have turned to the use of third-party appraisal management companies and the practice has led to complaints.

MAKING SENSE OF THE STORY FOR CONSUMERS
HVCC, which may result in appraisers evaluating homes in areas with which they are not familiar and using comparables that are inaccurate, has caused delays in closing sales, and in some cases, undermined sales if the appraisals undervalue a home’s current worth.
HVCC applies to conventional, single-family loans that are sold to Fannie Mae or Freddie Mac. It does not apply to loans backed by the Federal Housing Administration (FHA) or the Veterans Administration.
Through HVCC guidelines, borrowers are entitled to receive, free of charge, a copy of the home appraisal at least three days prior to closing, giving the borrowers more time to contest what they view as an inaccurate appraisal.
Borrowers and/or sellers who believe a home valuation is too low may appeal the valuation or request a second option. It’s important to note that the second valuation must be more than five percent higher than the first--anything less is considered an acceptable difference.
Appraisers are required to view the inside of homes being valuated, but not homes used as comparables. More often than not, the appraiser’s knowledge of the property is based solely on the description in the MLS or on the public land records. Yet, the previous owners may have removed appliances and caused other damages to the property. To guard against appraisers using non-comparable homes in the valuation, borrowers can work with their REALTOR® to review comparable homes in the neighborhood for differences the appraiser did not know about or failed to consider.

To read the full story, please click here

Job Gains Speed Up And More Seek Work

The Labor Department report, released Friday, showed jobs grew in a wide swath of the economy, from manufacturing to professional services, and offered reassuring signs that the U.S. economy is recovering. "We're on more solid ground after these data than we thought we were," said Alan Levenson, an economist for T. Rowe Price Associates. "That should reduce, at least at the margins, the concerns that ones might have had of the impact on our economy of what's going on in Europe."

The government said 290,000 jobs were created in April and it revised upward by a total of 121,000 the gains for the previous two months.

The jobless rate ticked up to 9.9% from 9.7% as 805,000 workers left the sidelines and entered or rejoined the labor force. The flood of new job seekers comes amid signs that employers are hiring, as often happens in the early innings of a recovery. "People are encouraged to come back in the labor force and start looking for jobs," said Julia Coronado, a BNP Paribas analyst. "It's good that they're not so discouraged anymore."

(more at http://online.wsj.com/article/SB10001424052748703338004575229932760855258.html)

Key Interest Rate Left Unchanged

Federal Reserve leaders left their target interest rate near zero on Tuesday and restated their intention to keep rates very low for an "extended period" Wednesday, even as they modestly upgraded their assessment of the economy.

Fed leaders left the federal funds rate in a range of zero percent to 0.25 percent, where it has been since December 2008, and said conditions are likely to justify leaving it at "exceptionally low" levels for "an extended period."

This is good news for those still looking to buy or refinance (if possible). However it is unclear how the market will adjust now that the Fed is no longer buying mortgage backed securities and word that a possible sell-off may be in the near future to shrink their balance sheets.

The point is interest rates are at historically low levels and as they begin to rise it might price you out of a home! If you're thinking of buying or are tired of renting contact me and we might be able to figure out a way for you to capitalize before rates begin to climb.

5 Things to Think About as a First-Time-Buyer

Here are 5 quick tips to keep in mind if you're a first-time-buyer. Being a first-time-buyer you don't have the experience you might need so here are a few good tips to try to help you out:

1. Low credit-score borrowers can pay thousands of dollars in interest over the life of the loan because they get charged a higher rate than someone with better credit.

2. Shopping for other things before closing. Lenders will continue to check credit scores right up to the closing date. Too much shopping could cause the lender to cancel the loan because they are worried you won't be able to pay the mortgage with your new added debt. Don't shop before your home closes...be patient.

3. Scrimping or opting out of inspections. Being surprised by things after you move in can be horribly frustrating. Know what you are getting into by having those who know what to look for find what might be wrong with the home during your inspection period. I cannot stress this point enough...GET INSPECTIONS!!!

4. Write an offer with contingencies. Buyers should leave themselves an opportunity to opt out if the inspections uncover problems that were not anticipated. Contingencies are your safety net so make sure your agent knows what they are writing in your offer.

5. Reserve fund for insurance, taxes and misc moving/home improvement. Insurance and taxes can be a surprise if you're not budgeting for them. I like impound accounts as you pay into it monthly and you don't have to worry about coming up with the money. Also, leave yourself a pad in case an appliance doesn't survive the move or you want to paint before you move-in. Plan ahead so that the moving experience is a good one.

There are obviously a thousand other things to keep in mind but I've found that these 5 seem to pop up most frequently. Contact me anytime if I can help you or someone you know with their Real Estate needs. Thanks!

SB401 to forgive CA Cancelled Debt Income THROUGH 2012

Underwater homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification. Signed into CA law today, Senate Bill 401 generally mimics Federal tax treatment of Cancellation of Debt Income. For debt forgiven on a loan secured by a "qualified principal residence," borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.
"Qualified principal residence" indebtedness is outlined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds if both were used in the same manner. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.
The tax breaks apply to debts discharged from 2009 through 2012!! Californians who have already filed their 2009 tax returns may still claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may however be exempt under other provisions. Taxpayers who are bankrupt or who are insolvent may also be exempt from debt relief income tax (please consult your tax attorney or CPA for consultation specific to your circumstance).

Up to $18,000 in Tax Credits Available for CA Buyers (for short time)

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take full advantage of both tax credits a first-time homebuyer must have an accepted contract for a home they plan on moving into before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they have lived in their existing homes for 5 years as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law. (contact me for more details)

This is a huge opportunity for those buyers out there to take advantage of some HUGE incentives. Keep in mind these are not deductions but actual credits!!! Use them for buying new appliances, a small remodel, or stash them away for a rainy day. But don't miss out on this opportunity if you are thinking of buying a home.

I'm here to help so please let me know how I can best do that for you!!!

$200 Million in Tax Credits for CA Buyers!!!

I’m glad to report that Gov. Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law.

AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

CA Extended $10,000 First Time Buyer Credit

California lawmakers have voted to extend a $10,000 tax credit for first-time homebuyers. The credit will apply to first-time buyers who purchase new or existing homes between May 1 and Dec. 31 of this year. It is for 5 percent of the purchase price, or up to $10,000. The bill received bipartisan support in the Assembly and Senate on Monday and will be sent to Gov. Arnold Schwarzenegger. The governor, who proposed the extended tax credit as part of his job-creation initiative, is expected to sign the bill.

I will post more information as it becomes available so stay tuned!!!!

Avoid Foreclosure!!! HAFA Program Can Provide Help

Some of the highlights of the program:
- Allows borrowers to receive pre-approved short sale terms before listing the property.
- Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
- Uses a standard process, uniform documents, and timeframes/deadlines.
- Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.
- Allows at least 120 days to sell the home (extensions permitted up to one year)
- Within 10 business days the lender must approve or deny the offer!!!!

If you are facing a foreclosure or are behind in your payments the important thing to realize is that YOU HAVE OPTIONS. Short Sales are less harmful to your credit and allow you to sell you home respectfully with a "SOLD" sign in the front yard!!! Please contact me if you have any questions.

Important Tax Info for CA Short Sellers!!!

Legislators Vote to Extend CA State Tax Exemption on Cancellation of Debt Income. This is very important if you are involved in a Short Sale - the amount forgiven is normally to be included as income on your tax return as Cancellation of Debt Income (CODI). Federal Taxes are currently exempt from CODI through 2012 under the Mortgage Debt Forgiveness Act. CA homeowners are NOT yet exempt from CODI on their 2009 state taxes if they lost their home due to a short sale in 2009 (2008 and 2007 sellers are exempt). Write your governor if this is important to you!!!

CLICK HERE TO READ SAC-BEE ARTICLE

(I am not a tax professional - please consult your tax specialist or CPA for further information specific to your situation)

New Foreclosure Alternative - A Plan that Pays Owners

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. The administration is trying a new approach - offering incentives for some of them to leave.

This latest program, which allows a short sale in exchange for a little spending money, is one of the administration’s most aggressive attempts to work on a problem that has defied solutions.

More than five million households are behind on their mortgages and modification plans have helped only a small percentage of them - much more needs to be done. There is also the concern that millions of foreclosures could delay or even reverse the economy’s slow recovery.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings by doing a short sale instead of a foreclosure. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

It is a step in the right direction and can offer help for many. There is a lot of work in a short sale for all involved so please make sure you qualify your agent first as the quality of the agent has a lot to do with the possibility of acceptance.

Please contact me for more information or if I can help in ANY way.