This Month in Real Estate January 2010 …………………………………………………………………………………………………………………………….. Commentary December closed out the year with further indications of a budding recovery, illustrating we’ve come far from the pessimistic outlook this time last year. Soft home prices, affordable financing conditions as well as the government’s tax break targeted at the housing market have contributed to providing the much needed boost to the housing market. Solid gains in home sale activity helps to pare down inventory to a healthier level, which in turn will likely bring more stability to home prices. The most recent Federal Reserve meeting indicated a more positive outlook about our economic condition as they pointed to plans to reel in emergency programs.  Mortgage rates, which have hovered around 5 percent for most of 2009, are starting to climb again. Economists expect these unprecedented rates to go back up as Fed’s program to purchase mortgage-backed securities expires in March and private investors are demanding higher returns. According to Nar 2009 President Charles McMillan, “Even with price declines in recent years, the typical home seller saw their equity increase 27 percent.”  NAR’s most recent Home Buyers and Sellers survey reported that 87 percent of survey respondents consider their home a good investment, and more than half see it as a better investment than stocks. This indicates that Americans still see homeownership as a source of steady long-term wealth accumulation. Employment will continue to be closely watched and steps on the road to recovery will likely continue to come one-by-one.  Although concerns remain, many experts are hopeful of a brighter year in 2010. The Housing Market Existing Home Sales – Up 44% from last year Existing home sales surged a record-breaking 44 percent from a year ago, the highest annual gain since NAR started tracking the data in 1999. The strong gain can be attributed to first-time buyers who accounted for 51 percent of all home sales, the highest on record dating back to 1981, as they rushed to beat the deadline for the first-time buyer tax credit that was due to expire November 30. The previous high was 44 percent in 1991. Sales activity is at the highest level since February 2007 when it reached 6.55 million. Median Home Price – Very favorable Low home prices continue to add the extra boost to home sales. Existing-home price was $172,600 in November, 5 percent higher from its low in January. While still 4.3 percent down from a year ago, it is the smallest decline in two years. Distressed properties, which accounted for 33 percent of all transactions in November, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes. Inventory – Lowest level in almost 3 years The supply of homes is now at the lowest level in almost three years. The supply of existing homes for sale at the end of November declined 1.3 percent to 3.52 million, representing a 6.5-month supply at the current sales pace, down from a seven-month supply in October.  Generally, a six-month supply is considered balanced. Compared to a year ago, there are now 15 percent fewer homes on the market. Mortgage Rates – Inching Up Mortgage rates have begun to inch back up as government support runs its course and interest rates rise. On December 24, the average 30-year fixed-rate mortgage was 5.05 percent, the first time it has gone above 5 percent since the end of October. According to Amy Crews Cutts, deputy chief economist at Freddie Mac, “Extraordinary resources have been put into keeping the rates down and supporting the mortgage market, and it’s hard to imagine that the rates can go much lower than they are.” Affordability – Best since 1970s Affordability continues to be at a record level thanks to unprecedented interest rates, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent. Sources: National Association of Realtors, Freddie Mac Government Action Residential Retrofit Program Vice President Biden recently announced a program called “Recovery Through Retrofit.” In addition to creating energy performance labels, it will create national energy performance measures for existing homes. It will provide the following: 1. Access to home energy retrofit information 2. Access to financing for retrofits 3. Access to trained professionals to perform the retrofit The goal of the imitative is to create more energy efficiency in homes to benefit the country’s energy consumption. Retrofits include but are not limited to energy efficient heating, cooling, and water systems, insulation, roofing, flooring, windows, and solar panels. Source: National Association of Realtors Cash for “Clunky” Appliances In efforts to vamp up energy efficiency, the federal government is implementing a rebate program for appliances. People can swap in their old appliances for new energy-efficient ones, saving electricity and saving on monthly bills. A 20-year-old fridge can use three times as much energy as a new Energy Star-approved fridge. The age of your appliances impact your actual savings, so check into it before purchasing. Important things to know: 1. Plans vary by state. Check out energysavers.gov for details. 2. Buy before it ends. Like the car rebate program Cash for Clunkers, this program has a set amount of federal money allocated to it. Once the $300 million is gone, the program will likely end. It is expected to run out quickly. Source: The Associated Press Government Calls for Increased Lending by Banks According to the FDIC, lending has fallen for five consecutive quarters – even though banks have become profitable again and have started to repay government loans. Banks lent $600 billion less from September 2008 to September 2009, representing a 7 percent decline. Banks site a lack of qualified borrowers as the primary reason and point to the trend of decreased borrowing during recessions. The goals of banks and the government appear to be in line now with each bank representative talking about getting aggressive with small business lending over the next year. Goals for 2010 small business lending include $5 billion for Bank of America and $4 billion for Chase. As banks continue to be profitable, they can be expected to use the proceeds to repay the government as well as increase their efforts to make good loans. Small business owners should expect an increase in the amount of loans available during  2010 compared to 2009. Holding true to the trend in 2009, a good credit score and steady employment will likely continue to be important conditions of obtaining a mortgage. Sources: The Washington Post, FDIC Topics For Buyers & Sellers Energy Savers for Buyers to Keep an Eye Out For 1. Begin with a right-sized home. If the home you buy is simply too large for you or your family’s needs or plans, you stand a good chance of wasting energy through excessive heating and cooling costs. If it’s too small, you’ll feel cramped and uncomfortable. It’s a big investment, so seek balance and buy it “right” from the outset. 2. Purchase ENERGY STAR appliances such as your TV, dishwasher, washer and dyer, and microwave.  And especially the refrigerator, as it alone contributes about 10 percent of the energy use in a home. Also, unplug electronics not in use or turn off power strips to avoid phantom charges. 3. Install efficient lighting such as compact fluorescent (CLF) or LED bulbs in every fixture. Lighting accounts for about 6 percent of an energy bill each year. 4. Get an energy audit and have tests performed to identify ways of improving your efficiency. You can always upgrade your heating, ventilation, and air conditioning (HVAC) system as well as your thermal envelope, which includes insulation, windows, and doors and the seals or weather-stripping around them.  Visit energy.gov/energytips for more tips Making Home Maintenance Routine Home ownership has its wonderful benefits, and as one of the single biggest financial assets many people own, preparing, planning, and making home maintenance a routine are important. Personal finance experts recommend setting aside at least 1 percent of your home price each year in a separate account for maintenance and repair costs. Automatically deducting the funds from your paycheck or automatically transferring it between accounts each month can make this easy.  Some years homeowners will have less than 1 percent in maintenance costs or repairs and some years they will have more.  When something big and unexpected happens; for example it’s finally time to replace the roof; this will provide the financial cushion to take care of it and the peace of mind knowing one of their biggest assets is well taken care of. Source: MSN Money	w
For a more detailed report with additional graphs and government action, please see the This Month in Real Estate PowerPoint Report. In an effort to reduce the impact on the environment, This Month in Real Estate PowerPoint Report is now also available in email newsletter format.  Please consider the environment before printing.



This week, I would like to focus on building GOOD credit.  With Christmas just around the corner, holiday shopping can be used as a tool to help increase credit scores.  I talk with people on a daily basis that don’t use, or don’t even have credit cards.  These people are missing the boat.  You have to realize if you don’t use credit, you can’t build credit.

When you apply for credit, creditors pull your credit report to see if you make your payments on time to other creditors.  If you have not proven yourself to other creditors by taking out a loan or using a credit card, getting a loan can be more difficult.

Credit cards are excellent tools to help people build their credit.  Let me re-phrase that, credit cards are excellent tools to help people build credit if they are used responsibly…  So many people don’t use credit cards because of the high interest rates and scary late fees—so they use cash.  Using cash however does nothing to build your credit.

My suggestion:  Set up a budget for your holiday shopping.  Whatever you decide to spend on gifts, put some cash aside and use credit cards to pay for the gifts instead.  When the bill comes at the end of the month, pay it off with the money you set aside.  By doing this, you are proving to creditors that you are responsible with money.  You can borrow it and pay it back on time.  Doing this on a regular basis will help to increase credit scores, making it easier and easier to qualify for other loans and great rates!

Kevin D. Weier

Author:  National Association of Realtors – 11/13/09
]]> http://smcbriar.wordpress.com/2009/11/13/pending-home-sales-rise-for-record-eight-straight-months/feed/ 0 smcbriar http://smcbriar.wordpress.com/2009/11/12/tax-credit-extended-and-expanded/ http://smcbriar.wordpress.com/2009/11/12/tax-credit-extended-and-expanded/#comments Thu, 12 Nov 2009 22:11:24 +0000 smcbriar http://smcbriar.wordpress.com/?p=87 ]]> Tax Credit Extended and Expanded

November 9, 2009

TAX CREDIT 2.0

Understanding the Extended Home Buyer Tax Credit

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:

• Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
• Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
• To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000. The maximum allowable credit for current homeowners is $6,500.

How is a Buyer’s Credit Amount Determined?

Each home buyer’s tax credit is determined by two additional factors:

• The price of the home.
  • Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
• The buyer’s income.
  • Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009,  single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit. The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

ARE YOU A GOOD “MOVE UP BUYER” CANDIDATE?

Madison’s “Move Up Buyers” benefit in several ways.

• The $6,500 tax credit may be the difference maker for you to take advantage of a move up. To better understand how this tax credit works, CLICK HERE for information provided by the IRS.
• Interest rates are very low. I would be happy to connect you with a reliable lender offering the best rates and mortgage options.
• Although a seller may take a loss on the home they sell, the gain received is likely to be much greater. The illustration above is a great example.
• Many of the “Move Up Buyers” need to sell a home that is priced in the hottest price ranges for Dane County real estate sales. In fact, properly priced homes in good condition continue to sell quickly. The initial $8,000 tax credit created lots of activity and sales for homes priced under $300,000.
• On the flip side, the home purchase is in the price range that is currently suffering the most. In Dane County the following are the hardest hit price points are $400,000+. In September, the following stagnant sales occurred:

In fact, Dane County currently has over 65 months of “inventory” for homes in the luxury home price range. In the past year, only 13 homes have sold over $800,000. What a great time to buy your dream house at the bottom, before the market rebounds.

So, are you a good candidate to take advantage of the tax credit?

Question:

Kevin-

I had a client that e-mailed me over the weekend and had the following question for me:

I received a notice from a card company stating they will change our terms and raise our rates unless we “opt out” of the new terms with higher rates.  If I opt out they close my account but I don’t have to pay it off right away and I continue making payments at my current rate and payment amount.  This seems too easy…does this negatively affect my credit?  Other than the fact that I have less available credit of course.  It’s not considered a settlement or anything weird like that?

Can you please let me know your thoughts?

Answer:

This type of “take it or leave it” letter has become very common from credit card issuers.  I have even received such a letter from CITI for an account that I have had for 14 years with no late payments.  To answer the question—it MAY affect credit negatively…  There are a number of factors at work here:

1. Closing the account will shorten the length of credit history which accounts for 15% of credit scores.  If the account has been open for a long time, I would not close it.
2. Closing the account will automatically increase debt utilization which accounts for 30% of credit scores.  If he is carrying balances on other cards, then I would not close it.
3. By closing the account, it could have a multiplying effect on other credit cards.  As other credit card issuers monitor his credit, they could see that the account has been closed.  They may see this as a risk threat and decide to also close an account.

The best bet as to not have any negative impact on credit scores is to keep the card open and pay it off quickly.  After a zero balance has been reached, only use the card for nominal purchases each month and continue to pay the balance off.

Kevin D. Weier from Credit Coach

In almost every case, a foreclosure in Dane County can be avoided.  If you know anyone that has been impacted by the economy, unforseen debt, anunrealistic mortgage or loss of income please pass this important information on.  Good news, I can help!   I have completed my CDPE Designation so that I can help Madison Area families avoid a foreclosure. 

Foreclosures are on the rise in Dane County.  Since 2000, there has been a 46% increase in the number of filings.  There are many reasons why this is occurring.  In most cases the family is facing a hardship such as loss of job, an unreasonable mortgage or unforeseen debt.  Many of us know someone in that situation.  So, I have made it my mission to help!

After learning about foreclosures, I was surprised to learn of the following statistic.  7 out of 10 families don’t reach out for help when they are in this predicament because they are too overwhelmed to deal with it. I understand how they feel, however banks prefer a short sale or renegotiation over a foreclosure in almost every situation.  Since I learned this, I have made it my mission to spread the word and help families in this situation. 

While many Realtors are turning their backs on foreclosures and short sales, I am taking it head on.  If you know of anyone I can help, please pass my name on.  I would like to meet with them confidentially to share all the options they have.  They have an option, however time is not on our side. 

Sherry Mc Briar, Certified Distressed Property Expert & Realtor

Phone:  608.662.9652

Email:    smcbriar@kw.com

Web:      SherryMcBriarConsulting

  Supported by:  Keller Williams Realty – Madison West

1) The tax credit is eligible until December 1st.  What this means is that your house needs to closed on or before December 1st.  In order for this to happen, it is recommended that you have an accepted offer by August 31st.  It’s going to be insane over the next 8 weeks and closings are going to take a bit longer to close than usual, because of this tax credit.

2) You are considered a New Home Buyer if you or your spouse  haven’t owned a house in the past 3 years.

For a great list of frequently asked questions about the home buyer tax credit click here.

Author: National Association of Home Builders