On the fence? Five things to consider when buying...

Jobs: Although many areas of the country were deeply impacted by the recession, some areas were less affected by job loss. If employment stability is a concern, prospective buyers should review job-growth data from the U.S. Bureau of Labor Statistics at www.bls.gov. The data provided by the Bureau is approximately one month old and shows the direction of the local economy.


Recent Sales Activity: Housing inventory and sales volume should be taken into consideration while house hunting. A large inventory of homes with few actual transactions can be a negative indicator. On the other hand, if inventory is falling and transactions are rising, that is a good sign. In January, the CALIFORNIA ASSOCIATION OF REALTORS®’ Unsold Inventory Index stood at 6.7 months, up from 5 months in December 2010, but down from 5.7 months in January 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.


Construction: Staying up-to-date on the number of building permits issued for local builders is useful for gauging builder sentiment and the future of housing activity. The California Building Industry Association recently announced that California homebuilders pulled 2,920 total housing permits in January, registering a 5-percent decline compared with a year ago and a 56-percent decline compared with December. However, the Construction Industry Research Board is projecting 62,000 total permits will be pulled in 2011, an increase of 38 percent compared with 2010’s total of 44,893 permits.


Mortgage Availability: Home buyers hoping to be approved for a mortgage should monitor local lending patterns. Following the financial crisis, most national banks tightened lending standards; however, some local banks haven’t been impacted as much as large lenders and are more willing to lend, even for higher-priced homes.


Anecdotal Evidence: Although buyers can access home listings online, one of the best ways to monitor the local housing market is to work with a REALTOR® and gather intelligence using their expertise and guidance.

Full Story: http://online.wsj.com/article/SB10001424052748703905404576164720668195108.html?mod=WSJ_RealEstate_LeftTopNews

How to prepare your home for sale

1. Have a home inspection
Be proactive by arranging for a pre-sale home inspection. For $250 to $400, an inspector will warn you about troubles that could make potential buyers balk. Make repairs before putting your home on the market. In some states, you may have to disclose what the inspection turns up.

2. Get replacement estimates
If your home inspection uncovers necessary repairs you can’t fund, get estimates for the work. The figures will help buyers determine if they can afford the home and the repairs. Also hunt down warranties, guarantees, and user manuals for your furnace, washer and dryer, dishwasher, and any other items you expect to remain with the house.

3. Make minor repairs
Not every repair costs a bundle. Fix as many small problems—sticky doors, torn screens, cracked caulking, dripping faucets—as you can. These may seem trivial, but they’ll give buyers the impression your house isn’t well maintained.

4. Clear the clutter
Clear your kitchen counters of just about everything. Clean your closets by packing up little-used items like out-of-season clothes and old toys. Install closet organizers to maximize space. Put at least one-third of your furniture in storage, especially large pieces, such as entertainment centers and big televisions. Pack up family photos, knickknacks, and wall hangings to depersonalize your home. Store the items you’ve packed offsite or in boxes neatly arranged in your garage or basement.

5. Do a thorough cleaning
A clean house makes a strong first impression that your home has been well cared for. If you can afford it, consider hiring a cleaning service.

If not, wash windows and leave them open to air out your rooms. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Wash light fixtures and baseboards, mop and wax floors, and give your stove and refrigerator a thorough once-over.

Pay attention to details, too. Wash fingerprints from light switch plates, clean inside the cabinets, and polish doorknobs. Don’t forget to clean your garage, too.

Consumer Confidence Index hits 3-year high

The Consumer Confidence Index rose in February to its highest point in three years as Americans are feeling more optimistic about their income prospects and the direction the economy is headed.

The Conference Board says its Consumer Confidence Index climbed to 70.4 this month, up from a revised 64.8 in January, hitting its highest level since February 2008. It was the index's fifth consecutive monthly increase.



Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2011/02/22/national/a070307S09.DTL

FHA Mortgage Insurance set to go up April 18th!

FHA Mortgage Insurance is set to go up from 0.9% to 1.15% on April 18th which will increase your monthly payment. If you know anyone looking to buy with an FHA loan please tell them they must be in contract and have an FHA case number assigned prior to April 18th!

What does this mean for you?

On a $200,000 purchase you will be paying $40 more every month. If you know anyone that might be looking to buy with an FHA loan then please make sure they are aware of this coming change. Thank you.

Tax Benefits of Home Ownership

Home mortgage interest deduction: The interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home is deductible as an itemized deduction. In the early years of a home loan most of the payments consist of interest, so this deduction is particularly substantial during the first years of homeownership.

Depending on the state a buyer lives in and his or her tax bracket, this deduction can reduce the cost of borrowing by one-third or more.

Home equity loan deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. The money can be used for any purpose, such as paying off high-interest credit card debt. In contract, the interest on credit card debt is not deductible.

Property tax deduction: Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home. This is another itemized deduction that renters don't get.

Deductible homebuying expenses: Various closing costs ordinarily involved in a home purchase are also deductible as itemized deductions, including loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.

$250,000/$500,000 home-sale exclusion: Perhaps the greatest tax benefit of owning a home comes when a person sells it at a profit. Homeowners who lived in their home for two of the prior five years prior to its sale need pay no income tax on a substantial amount of their profit -- $250,000 for single homeowners and $500,000 for married homeowners who file jointly. This exclusion can be used once every 24 months.

7 Steps to Home Ownership

1. Decide how much home you can afford
Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care if you plan to have children.

2. Develop your home wish list
Be honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.

3. Select where you want to live
Make a list of your top-five community priorities, such as commute time, schools, and recreational facilities. Ask your REALTOR® to help you identify three to four target neighborhoods based on your priorities.

4. Start saving
Have you saved enough money to qualify for a mortgage and cover your downpayment? Ideally, you should have 20% of the purchase price set aside for a downpayment, but some lenders allow as little as 5% down. A small downpayment preserves your savings for emergencies.
However, the lower your downpayment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your downpayment size can also influence your interest rate and the type of loan you can get.
Finally, if your downpayment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and downpayment assistance programs for first-time buyers.

5. Ask about all the costs before you sign
A downpayment is just one homebuying cost. Your REALTOR® can tell you what other costs buyers commonly pay in your area—including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.

6. Get your credit in order
A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.
You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, Experian, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit card debt.

7. Get prequalified
Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.
If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.
Consider your financing options. The longer the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Be sure to calculate your affordability at both the lowest and highest possible ARM rate.

Source: http://members.houselogic.com/articles/7-steps-take-you-buy-home/preview/

Real Estate - Finally a Good Investment?

• Everyone hates homes - When the housing market is in the doldrums, people tend to avoid thinking about the value of their home. Sellers complain they’re not getting offers and buyers bemoan the strict lending requirements. However, prospective buyers should be contrarian and take advantage of a down housing market.
• Smart people are buying real estate - A prominent hedge-fund manager said in a speech last fall: “If you don’t own a home, buy one. If you own a home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.” He believes that interest rates and home prices will rise this year, so real estate bargains won’t last much longer.
• Real estate performs well during inflation – Convention says Treasury Inflation Protected Securities, commodities, and real estate do well in an inflationary environment. Real estate performed well during the period in the 1970s, when persistent inflation and high unemployment occurred.
• Demand may be coming back - Job creation and getting people employed are the two major factors in the housing rebound. There’s much debate about when the job market will recovery. Optimists say the recovery will happen this year, while pessimists say it won’t happen for several years.

Excerpt from:
http://www.smartmoney.com/personal-finance/real-estate/-1295050347411/

Price Differences: Foreclosure vs Short Sale vs Standard Sale

Housing prices vary from city to city, but even within your neighborhood or community, there may be distressed and non-distressed sub-markets with significant price differences. To illustrate, the overall median sale price of a detached existing home has been just over $300,000 throughout 2010. By comparison, the median price of a conventional non-distressed sale was about a third higher at roughly $400,000. At the other extreme, REO properties sold by banks were about a third lower than the overall median at roughly $200,000. Short sales, however, were not so steeply discounted. With a median price of roughly $270,000 over the past year, short sales were priced about 10 percent below the overall median and about 25 percent higher than REOs. What explains these differences in prices?

REO properties are sold substantially below market price because they are typically smaller in size, generally not well-maintained, and may have title clearance issues that are not desirable to home buyers. Also, since banks and lenders are not in the business of property management, they try to get rid of the inventory faster by reducing prices to below market level.

Short sales are usually priced somewhere between REO sales and market sales. These are properties owned by “underwater borrowers” who cannot pay off the mortgage balance. To avoid incurring hefty costs from a foreclosure proceeding, lenders agree to discount the loan balance. With lenders willing to concede, short sale properties are priced below market value but above what they would have sold in foreclosure status, so lenders could minimize the financial loss that would have incurred otherwise.

source: http://www.car.org/marketdata/realestate411/re411dec2010/

Interest Rates and How it Might Affect Your Purchase

What is happening with Mortgage interest Rates and how does it affect me?
Freddie Mac said Thursday the average rate on a 30-year fixed mortgage rose again this week. After hitting a 40-year low in November, the average interest rate on a 30 year fixed mortgage has risen almost 16%.


Why?
After falling for 7 months in a row, mortgage interest rates are rising because investors are shifting money out of Treasury bonds and into stocks largely on the expectation that the tax-cut plan approved by the U.S. Congress and a recovering economy will spur growth and potentially higher inflation. As investors flee treasury bonds, the U.S. Treasury has to raise the yield on its bonds to attract investors back who are selling their bonds and buying stocks hoping to cash in on the higher returns that stocks offer. Since mortgage rates are heavily tied to the 10-year Treasury note, that means that as the Treasury raises the yield on its bonds…it’s byproduct is higher mortgage interest rates.

Since most of the financial indicators are pointing to increased productivity and profitability in U.S. companies, this data lends weight to the idea opinion that the economy is recovering. Even in our own financially depressed market in the Central Valley we are beginning to see new signs of life as more businesses are having “Grand Openings” than at any time in the last 3 years. Over the last 3 years, the U.S. Government has been using our own tax dollars and “borrowed money” called “stimulus” money to purchase its own bonds in the effort to keep yields low and as such…keeping mortgage interest rates artificially low as they are tied so closely to the Treasury yield.

As the need for stimulus weigns, the U.S. Government will stop buying treasury bonds, just as they stopped buying Mortgage Backed Securities earlier this year and that will cause interest rates to return to rate that is supported by normal economic activity. The last time interest rates were left to the free-market, rates were in the mid 6% range.



What does that mean for the home buyer?
It means simply that if the economy continues to improve, interest rates will continue to rise. Since higher interest rates mean higher monthly payments, this means that the cost of home ownership will be going up if the economy continues to improve. What will be impacted the most with rising interest rates will be the amount that a borrower can spend on a house. Since borrowers are limited to roughly half of their gross income for housing expenses, credit card bills and installment loans, the higher the interest rate, the less money a borrower can afford. If a consumer can borrower less money because the payment on the borrowed money is higher, they will have less money to spend on a house. This means simply that if you wait to purchase a home until interest rates are higher, you will be buying a smaller house or a house that is in worse condition.

Now that you are armed with the understanding of what is happening, why it is happening and what may be in the future as far as interest rates go, it is time to give consideration to how you should proceed. If you have questions or would like to discuss your situation further, feel free to contact me, I'd be happy to discuss your plans with you.

Case-Shiller's Index declined 2% in 3rd Quarter of 2010

New York, November 30, 2010 – Data through September 2010, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined 2.0% in the third quarter of 2010, after having risen 4.7% in the second quarter. Nationally, home prices are 1.5% below their year-earlier levels. While housing prices are still above their spring 2009 lows, the end of the tax incentives and still active foreclosures appear to be weighing down the market.

Modesto as Investment Opportunity - Money Magazine

Money Magazine (Sept 2010) has highlighted Modesto as one of the smarter investment opportunites. They estimate that prices have dropped 61% since their peak and estimate a good five year forecast of appreciation of 34% for single-family homes. Whether it be a rental property or a home for yourself it remains to be a great time to purchase. Please contact me at tcreKevin@gmail.com with any questions that you might have.

Existing home sales slightly down

NEW YORK (CNNMoney.com) -- Following a couple of months of gains, sales of existing homes retreated again in October, an industry report said Tuesday.

The National Association of Realtors reported that the number of homes sold fell 2.2% from September to an annual rate of 4.43 million. The rate was down 25.9% from 12 months earlier.

The report came in just about at expectations. A consensus of experts surveyed by Briefing.com had forecast an annualized sales rate of 4.42 million.

"The housing market is experiencing an uneven recovery," said Lawrence Yun, NAR's chief economist. "Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels."

Most (and least) affordable cities to buy a home
Home sales have been slow despite some of the best buying conditions in many years: interest rates near 4% for 30-year fixed-rate loans, the most affordable home prices in many years and a wide choice of homes available for house hunters.

The median price of all existing homes sold during the month was $170,500, down 0.9% compared with 12 months earlier. About a third of the market was in distressed properties, repossessed homes and short sales.

Mike Larson, a housing market analyst for Weiss Research, said that positive and negative forces have been offsetting each other, leaving a market in limbo.

"You have low home prices and interest rates on the one hand, but trouble getting financing on the other," he said. "And unemployment remains stubbornly high."

The struggling economy certainly has dampened housing market performance, with unemployment well above 9% nationally. The job outlook seems to have brightened a bit lately.

(to read the full article - http://money.cnn.com/2010/11/23/real_estate/home_sales_slow/index.htm

Market Update

The supply of homes rose in August but remains lean by historic standards and is responsible for the price gains of the past several months. The MLS-based unsold inventory index rose from 4.6 months supply a year ago to 6.1 months supply in August 2010. Calculated as the ratio of listings to sales for a given month, the unsold inventory index rose mainly because of the slowdown in sales in the aftermath of expiring homebuyer tax credits, but there was also an uptick in the number of listings. Sales in the first half of the year averaged 520,200 homes, but “borrowed” from the second half of the year, resulting in a July sales figure of 439,680 homes, with slight improvement in August to 447,530 sales. Since late 2007, California home sales have consistently exceeded the trough level of 255,000 homes that was experienced in September and October 2007.

Concerns about the housing market and the general economy abound in the news. U.S. sales of homes stalled out at new lows for this cycle in July and August and the supply of homes nationally is nearly double that of California. While the housing sector is an important cog in the economy in its own right, it also plays an important role in transmitting the effects of monetary policy actions into the consumer economy. In other words, policy makers know that if they can spur activity in housing, the rest of the economy should also pick up.

What does that mean for consumers and prospective home buyers in particular? Efforts by the Federal Reserve Bank to reduce long term rates in the coming months should result in historically low mortgage rates. With the median price in California back to 2002 levels, affordability will be at record-high levels over the foreseeable future. For those households that are in a position to buy a home, the coming months will offer a rare opportunity to get the most for their money by buying, whether as first-time buyers or trade-up homeowners. Their actions will also give the economy a much needed boost and contribute to general economic recovery. So as it turns out, what’s good for home buyers is also good for the economy.

(excerpt from http://www.car.org/marketdata/trendsarchives/markettrendsseptember2010/)

Mortgage Rates Inch Up

Fixed rates on home loans edged higher this week after three weeks of declines, Freddie Mac said in its latest survey.

Lenders told the big mortgage finance company that they were offering 30-year fixed rate mortgages at an average of 4.21% to well-qualified borrowers who paid 0.8% of the loan amount in upfront lender fees and discount points.

That was up from 4.19% the previous week, which Freddie said was the lowest long-term mortgage rate since 1951. A year ago, the average rate in the survey was an even 5%.

Private Transfer Fees

Congress may soon weigh in on a controversial technique for financing the capital costs of new housing developments, with Rep. Maxine Waters, D-Calif., introducing legislation that would prohibit the collection of private transfer fees on all federally related mortgage loans.

The Federal Housing Administration has already said it won't insure loans encumbered by private transfer fees, and federal regulators have started a formal process that would ban Fannie Mae, Freddie Mac and the Federal Home Loan Banks from investing in loans backed by homes that carry the fees.

Private transfer fee covenants typically allow a third party, such as a developer, to collect a fee equal to 1 percent of a property's sale price every time its sold. The covenants are often in place for as long as 99 years.