RealEstate680

The new housing bill, scheduled to go into law next week, has a tax credit provision for first time homeowners:

BREAK FOR FIRST-TIME BUYERS If you are buying a home for the first time, and it is your primary residence, you are eligible for a federal tax credit of $7,500 or 10 percent of the purchase price, whichever is smaller. With a tax credit, you subtract the credit amount from the total you would otherwise pay to the Internal Revenue Service. So if you owe $1,500 and you qualify for the credit, you would end up getting a $6,000 refund.

There are two big catches, though. If you earn a modified adjusted gross income of more than $75,000, or $150,000 if you are married and filing your tax return jointly, the credit starts to phase out. For single people, it phases out completely at $95,000 of annual income, while for married people filing jointly, it phases out at $170,000.

But you have to pay back the credit over the next 15 years, in equal amounts each year when you pay your federal taxes. That makes this more like an interest-free loan than a true credit. According to the National Association of Realtors, there were about 2.5 million first-time home buyers in 2007. A large proportion of them would have qualified for this credit, but whether it is enough to push would-be buyers over the edge this year remains to be seen.

The tax credit is retroactive to home purchases on April 9, 2008, and expires on July 1, 2009. If you purchase a home from Jan. 1, 2009 to June 30, 2009, you can claim the tax credit on your 2008 tax return.

New York Times

 

Bank of America is reporting that quarterly profits did fall, but less than expected.  I guess in Lay-person language that’s a very positive sign.  The 40% drop in earnings show that the bank has stated a loss for the past 12 months.

Bank of America goes on to say the compesating business was  investment banking that showed a $357 million trading profit.  So where’s the credit crisis?  It’s on Main Street, not Wall Street. 

I have to give Bank of America credit for their positive attitude towards the mortgage business.  If my instincts are correct, they will emerge as a Super Player in consumer mortgage banking as well as wholesale business through mortgage brokers, small banks and credit unions.

Walnut Creek median home prices and median inventory reflect strengh in all four quartiles of the real estate markets.

This data shows that there are some very positive signs in the Walnut Creek real estate markets.  We’re still in for a bumpy ride, but it’s important for us to see that there are positive points to the markets as well.

Let me know if there’s specific data you want to see. 

The politicians in Washington are creating a “bail-out” for banks and homeowners that actually has more good features and bad.

Homeowners that are not paying their mortgages and banks facing big losses would get government help under a foreclosure rescue that has broad Washington, bipartisan support.

The lynch-pin of the plan would let the Federal Housing Administration (FHA) back up to $300 billion–NOT ENOUGH!!! in new loans to give struggling homeowners more affordable, fixed-rate mortgages. It allows lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure. 

The piece that’s missing is how hoes it help the homeowner that is 4 months down on their mortgage and is facing a Notice of Default, how do they qualify for the new loan.  Are banks and credit companies willing to show a Notice of Default or home foreclosures as a hick-cup on a credit report? 

Here’s are the “talking points to the Bill.”

• A refundable tax credit of up to $8,000 for first-time homebuyers.
• Establishes a new, temporary FHA program (HOPE for Homeowners) to help homeowners who are at risk of losing their homes to refinance their mortgages, if their lenders voluntarily agree to participate in the program.
• The program will be paid for using fees paid by Fannie Mae and Freddie Mac –- not taxpayer dollars.
• Only certain owner-occupants would be eligible to refinance –- no investors or investor properties will qualify.
• Creates a tough, new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to reduce the possibility of an expensive taxpayer bailout someday.
• Sets minimum standards for mortgage brokers and strengthens the “Truth in Lending Act” (to require better disclosure to borrowers before they sign a mortgage).
• Provides mortgage protections for service members and veterans, such as lengthening the time a lender must wait before staring foreclosure proceedings from three months to nine months after a soldier returns from service.
• A standard property tax deduction for taxpayers who don’t itemize on their returns.
• More than $10 billion in additional bond authority that states could use to provide loans to first-time homebuyers or to finance the construction of affordable rental housing.
• An additional $150 million for foreclosure prevention counseling.

 As a real estate professional in

Walnut Creek, California the positive piece of the bill in my opinion is that this will modernize FHA and create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants.

“Madam Pelosi, please be sure to keep loan amounts high enough for California real estate.”  In advance, thanks for putting more regulations on an industry that is doing a fine job in correcting itself.  There was plenty of creed in the past several years, but I am skeptical that government regulations will solve these problems.

 

The Rancho San Miguel community in Walnut Creek California is made up of Eichler Built-Mid Century Modern homes, built in the 1950’s.  Their design is quite unique and has a tremendous following of people who want  to return these homes to their original condition.  Many of today’s building materials lend themselves to this style. 

There are three homes for sale as of this post.

23 San Marino Court
4 bedroom, 2 bath

249 San Antonio Way
3 bedroom, 2 bath

183 Los Cerros Ave.
4 bedroom, 2 bath

Please send me an email or give me a call if you would like to know more about these homes for sale or Eichler Homes in general.

If we take the real estate market in Walnut Creek and divide it in fourths; we can analyze which market segment has the most movement and of couse what market segment has the least.  This graph shows that the third quartile seems to have decreasing inventory and the first quartile has increasing inventory.

Take the same data and change Walnut Creek real estate days on market  to Walnut Creek avereage price by the same quartiles and the market shows that the changing in inventory does not effect the prices.

I do see that the two lower quartile markets show signs of improvement.  It’s a great time to buy a home!

Sol Henik, asked me about the amount of inventory for surrounding Cities of Walnut Creek.  Here are graphs for Walnut Creek, Concord, Martinez, Pleasant Hill, Lafayette, Orinda, Alamo and Danville.  These graphs represent the MEDIAN priced homes.

Definition of Days of Inventory:  The amount of days it would take at the current sales rate to sell all the homes currently on the Multiple Listing Service.

The inventory are increased in Pleasant Hill, Lafayette and Orinda.  My guess would be that it’s because there was not a lot of inventory in these markets while prices were stable or even increasing.

The Martinez real estate market had a lot of inventory and this graph shows that the median real estate market in Martinez is something to keep a close eye on.  There may be good opportunity.

The rest of Contra Costa County, the “680 real estate corridor” continues to move along with far more success than most of Contra Costa County. 

 I received this from an anonymous source that claims it’s a memo from Fannie Mae to Lenders.  I believe it probably true. 

FNMA has released their proposed policy to lenders for comment, however, their final policy may not be released for a while.  

In the current real estate environment of soft markets and declining property values some borrowers are finding they are upside down on their home and owe more than the property is worth.   This has led to a new scheme that we’re seeing in many areas of the country referred to as “Buy and Bail”.  

Here is an example of the new scheme that we recently witnessed:  The borrower owed $430,000 on their existing house but the value of the house was roughly $270,000.  Houses very similar to the borrower’s current residence were selling for $270,000 in the same or competing neighborhoods.   The borrower applied for a loan to purchase a new home and claimed that he will lease out the existing house.   Once the new transaction closes, the borrower intended to walk away from the previous home leaving the lender with yet another foreclosure.

This scheme has a high risk of fraud because the lease agreement on the borrower’s existing house is often fraudulent.   In an effort to stop this from happening we are implementing the following guidelines immediately for any borrower who has an existing home that is either listed or will be kept as a second home or investment property that is in either a (i) Soft Market Category 4 or 5 or (ii) area in which the appraisal indicates that values are declining or there is an over supply or a marketing time in excess of 6 months.

Existing Property is Listed For Sale:
The borrower must qualify for both the PITI on the existing property and the PITI on the new proposed property.

Conversion of the existing property to a Second Home:
The borrower must qualify for both the PITI on the existing property and the PITI on the new proposed property.
The borrower must have 6 months PITI in reserves for BOTH properties.  We may consider reserves of no less than 2 months for both properties if there is any documented equity in the existing property. 

Conversion of the existing property to an Investment Property (with a positive equity position)
75% of the rental income may be used to offset the PITI of the existing property if the borrower has a positive equity position in the property.  The equity position must be based on a current AVM and the total liens against the property.
The rental income must be documented by a fully executed copy of a lease that extends for at least a 12 month term and receipt of a security deposit from the proposed tenant deposited into the borrower’s account.  The loan specialist must verify the lease term and rental amount by contacting the tenant by phone.

Conversion of the existing property to an Investment Property (with a negative equity position)
If the existing property is in a negative equity position NO credit may be given to any proposed rental income and the borrower must qualify with the full PITI of both properties.
The borrower must have 6 months PITI in reserves for BOTH properties.

I’ve not seen this happen in the Walnut Creek home market, and I did not publish this to encourage anyone to try to committ fraud.  May point is that this industry is self correcting and we will come out the other end of theis mess with better and more accurate guidlines and less creed.