Foreclosure or Short Pay Debt? New Laws

Starting September 25, 2008, the federal income tax exemption for debt forgiven on a home loan now partly applies to California's state income taxes.

Federal law provides a tax exemption for debt forgiveness on a loan incurred for acquiring, constructing, or substantially improving a principal residence up to $2 million if the debt is discharged from 2007 through 2012.

Under the new California law, the maximum qualifying debt is $800,000, and the maximum exclusion is $250,000. The California law only applies to a debt discharged in 2007 or 2008. (Info by California Association of Realtors)

Market Forecast for 2009 by CAR

It's time for the annual California Association of Realtors' market forecast which always consists of many more Powerpoint slides than what is shown here.

For the buyers and sellers of the next year, it's time to think, if not act. The trends already show certain things:

• Contrary to the decrease in sales for the past two years, this year California single family home sales have jumped up by 12%, and will continue to increase next year, along with an increase in the 30-year-fixed rate mortgage.
• The overall median house price is projected to decline from 2008's 37% decline to a much smaller decline for 2009 of another 6%.
• The notices of default issued in Southern California during the second quarter of 2008, over 68,228, exceeded the previous record high of 61,541 notices in the first quarter of 1996.
• Highest number of the sub-prime adjustable rate loan resets (69% of all California subprime loans) peaked in 2008, declining to 24% in Los Angeles County in 2009 and to 8% in 2010. The decline is similar for the rest of California.
• The Alt-A adjustable rate loan (58% of all Alt-A loans in California) resets, however, will peak again in 2010, with the highest percentage of those loans being in Southern California and San Francisco.
• FHA and VA mortgages are now just over 20% of the mortgages, offering favorable rates for first-time buyers.
• Percentage of first-time buyers is the greatest in the last 7-8 years, getting closer to 40% of all buyers.
• Los Angeles County had the highest number of sales in August, 2008.
• In Los Angeles County, bank-owned (REO) properties sold at about 80% of all sales prices, and non-bank-owned sales prices were over 100%--OR, the median price of REO properties were $325,000, compared to non-REO properties at $420,000. Why? Unlike the last down market, the bank-owned properties are often in the "fixer" category, to the extent that laws are recently passed forcing banks to physically maintain their inventory of homes to prevent blight in neighborhoods. For another "take" on the business of making an offer on bank properties, read this Realtor's candid description of her experience.
• Overall, California 2008 sales are up by 85%, compared to an overall decline in sales in the rest of the country.

For buyers, it's very important at this time to know what to expect when submitting an offer on the bank-owned property, or the seller's short sale property, where the bank is again involved in approving the seller's request to sell for less than is owed on the property. The "credit crunch" and bank bailouts come into play here, the seeming inefficiency of many banks along with organizational mergers, have all impacted how those properties are dealt with. So buyers need to know what kind of seller they are dealing with, the difference between the distressed sale and the "normal" equity seller, who might be in a better position to help a buyer with closing costs.

As more buyers recognize their opportunity, will it mean once again having to compete with other offers? The temptation to wait for a lower price may also ultimately bring more buyer competition into the market.

Those "Down Home" Prices

The saying goes "All real estate is local", but nevertheless we have some national news:

The National Association of Realtors has revised its 2008 median home sales price prediction to a downward fall of 8.3 percent, as opposed to an earlier 2008 prediction of a 7 percent drop in price.

California Association of Realtors reports that the number of sales for October are currently 85 percent above the low from one year ago. In August, the median statewide price was $350,140, about a 40 percent decrease from one year ago. Manhattan Beach and Santa Monica were among the 10 highest median price cities in the state. Mountain View's median home price increased by 17% over last year.

Locally, Los Angeles County, figures for August 2008 for single family homes show a median price of $390,000--down from August 2007 median price of $590,250. Does that mean all houses have dropped $200,000 from last year? More likely, fewer houses in the higher price range have sold than the many distressed properties selling at lower prices, representing a much bigger opportunity for the first time buyers. County-wide, about 450 more single family properties sold in August 2008 than one year earlier, while fewer condos sold in the same time period.

Nationally, "the median resale home price is expected to be $200,700 in 2008 and to rise 2.8 percent next year, while the median new-home price is expected to drop 5.1 percent this year to $234,500 and to rise 2.6 percent next year." (Inman News).

Locally, the median price in August for single family homes in Long Beach zip code 90803 (Belmont Heights, Belmont Shore, Naples, etc.) was $885,000, down about 15% from one year ago, but 90802 (downtown, Alamitos Beach, etc.) actually increased by about 19% from one year ago. Zip code 90805 had a median price of $260,000 with the highest number of sales in Long Beach--50--in August 2008.

For a customized property search, please contact me. It's a good time to buy! If you're a motivated seller, there's very likely a good buyer for your property.

Julia Huntsman, Broker Associate, e-PRO®, REALTOR®
All California Brokerage, Inc.
562-896-2609
mailto:ocean@surfside.net
http://www.juliahuntsman.com/
http://www.longbeachrealestate.blogspot.com/
http://www.longbeachrealestate.listingbook.com/

Are You Wanting to Buy, But Waiting?

Trulia just completed a survey on homeownership:

The results from our national American Dream Housing Study conducted by Harris Interactive are in. “70 Percent of Non-Homeowners Have No Plans To Purchase a Home in the Next 12 Months; Nearly Half in 18-34 Age Group Say It’s Too Costly to Purchase a Home in Today’s Market”.

If you're one of the people who are believe that too, (it's true, homes cost more than a nickel) just remember, there are programs to take advantage of (it might put you into the 30%):

Tax Credit - Find out if you qualify for the $7500 tax credit

FHA Loans - Hope for Homeowners Act of 2008

California Housing Finance Agency - First mortgage loan and down payment assistance programs, including teachers.

County of Orange Mortgage Assistance - First time homebuyers in Orange County areas.

Los Angeles County Home Ownership Program - Down Payment assistance program, buyer education

Long Beach Housing Development - Help for first time buyers with down payment assistance as a 2nd mortgage.

Veterans Administration - For active and retired miliary personnel. No down payment for loans under $417,000, see site for all requirements.

Acorn Housing Organizaton - For moderate-to-low-income buyers with lower credit scores, maximum loan amount $500,000.

National Homebuyers Fund - For first time and repeat buyers. Allows for non-traditional credit and flexible sources of income.

Schools First Credit Union - Located in Orange County, but open to all public employees and their family members anywhere in California. Can use credit union-approved lender only. Cannot own a property in the last 3 years.

CalPERS - California Public Employees Retirement System - Offers a 95/5 program allowing 5% personal loan borrowed against retirement account.

CalSTRS - State Teachers Retirement Servie - Allows for FICO score as low as 620.

Other city and local housing programs include those for Anaheim, Bellflower, Buena Park, Chino, Corona, Fullerton, Garden Grove, Irvine, La Mirada, Long Beach, Los Angeles, Orange County Redevelopment Agency, Westminster Redevelopment Agency. Call me for contact information.

NOTE: The Nehemiah, HART and Ameridream programs are no longer in effect.

Bixby Village: Your Next Home

The Bixby Village area began as a new development of over 350 homes and townhomes in the 1980's.

The single family homes that sit along the east side of the complex have golf course views. On the interior are the townhome groupings with tree-lined greenbelts and guest parking areas, entered from the interior roadways. This area is actually one of the few townhome developments in Long Beach and is well situated adjacent to CSU Long Beach, a major grocery chain store and shopping center, and other nearby shopping malls within several minutes' driving distance.

The townhome floorplans may be 2 or 3 bedrooms, and range between 1700 sq. ft. to over 2300 sq. ft. and include vaulted ceilings, fireplaces, formal dining areas, larger kitchens and patios for sitting or entertaining off the living room and dining areas, and attached 2-car garages. Some floorplans in both types of properties include a downstairs den or bedroom. Most bathrooms are still furnished with the original marble-style counters, large tubs and shower enclosures. The homeowner association includes a pool and clubhouse. The architecture is Cape Code style in several shades of blended exterior colors, ranging from warmer sand to cooler blue tones.

Single family homes are larger 3-bedroom plans, going up to over 2700 sq. ft.

Currently, there are 5 active listings in this development, 4 are single family homes ranging in asking price from $749,000 to $899,000; the townhome is currently listed at $665,000. Selling prices in the last 3 months for the townhomes (no SFR sales in that time) ranged from $580,000 to $665,000.

This complex is a great opportunity to live within a 5 minute drive of the beach and Belmont Shore, yet be close to the 405 freeway.

For more information, call me at 562-896-2609 or visit my site for Long Beach Condos, Lofts and Associations to search for current properties in Bixby Village for townhomes and condos. For condos, townhomes and single family homes in and adjacent to Bixby Village and the golfcourse, see the Bixby Village area listings here.

Julia Huntsman, Broker, e-PRO®, REALTOR®

Summer Sales Active in the Long Beach Areas

This 5-bedroom and 3500 sq. ft. Long Beach estate home in Belmont Heights (with guest quarters) closed escrow in August and sold for $1,950,000 after being on the market for 18 days before going into escrow.

What happened with other residential properties in July and August (as listed in the So Cal MLS)? In Long Beach, Cerritos, Lakewood, Seal Beach and Signal Hill, properties were on the market about 74 days before going into escrow, and sold at about 93% of their original list price:

Long Beach

Condos

• 132 sold
• Selling price range: $73,100 - $885,000
• Selling price to original list price (SP/OLP) - 91%
• Average of 74 days on market (DOM)

Houses - July

• 178 sold
• Selling price range: $100,000 - $2,825,000
• SP/OLP - 92%
• Average of 70 DOM

Houses - August

• 190 sold
• Selling price range: $102,000 - $3,800,000
• SP/OLP - 94%
• Average of 82 DOM

Signal Hill

In a city previously populated by more oil derricks than houses, this 1946 and 1070 sq. ft. bungalow sold at $275,000 after 42 days on the market, very fast for a short sale. No garage. This is the low end of this market in an older neighborhood. New view houses on the hill sell for triple.

• 17 houses and condos sold
• Selling price range: $280,000 - $1,128,182
• SP/OLP - 96%
• Average of 75 DOM

Cerritos

This spacious 1970 four-bedroom 1820 sq. ft. home in Cerritos sold at $640,000 after 79 days on the market, under conditions of a notice of default and a short sale.

• 47 houses and 5 condos sold
• Selling price range: $238,800 - $1,299,000
• SP/OLP - 95%
• Average of 58 DOM

Lakewood

• 105 houses and 8 condos sold
• Selling price range: $252,000 - $789,000
• SP/OLP - 93%
• Average of 65 DOM

Seal Beach

This oceanfront, with Catalina views, 3-bedroom 4200 sq. ft. home with lap pool and wine cellar sold for $5,500,000 after being on the market for 237 days.

• 15 houses and 6 condos sold
• Selling price range: $240,000 - $5,500,000
• SP/OLP - 91%
• Average of 89 DOM

Even A Middle School Student Could Get It

Quote of the week:

"Amid the extraordinary financial events of the last few days, the Fed kept monetary policy on hold. In doing so, the Fed made clear its desire, to the extent possible, to separate its monetary policy decisions from the circumstances surrounding particular financial institutions." -- Peter Kretzmer, economist at Bank of America (my italics). And we also learn today that the Federal Reserve will not reduce the rate.

In times of market volatility it's easy to speculate on impacts, effects, and the future--overall negativity. Unfortunately, the subprime mortgage fallout is having a continuing story in the downfall of certain financial institutions. The story of this down market is not one of major job loss, as it was in the 1990's, where people declared bankruptcy and lost their houses due to lack of income--it's one characterized by the wrong loans for the wrong borrower, often made with lack of disclosure. Bank of America, for example, is still standing because it did not join the subprime bandwagon, although it certainly offered many loans with more flexible guidelines that it doesn't offer now. The worst part of all this, in the end, is that fewer banks will be around for consumer choice--at least that's the way it looks now.

One of the terms buyers need to know is "RESPA", which stands afor Real Estate Settlement Pratices Act. Before you assume this is something totally boring and far too much legalese, just remember that one of the reasons borrowers got into trouble is that they didn't understand their costs statement, didn't really look at their Good Faith Estimate required by the borrower to give to them--if they had, and if they knew just a little bit more about the basis of loan financing, they might not have ended up with what they did.

Unfortunately, these things are not taught in high school, even a middle school student could get it (parents, you must know that sometimes I get phone calls from kids who're reading my blog and have a question), but buyers under the crunch of fast decision making are encountering terms and practices they have infrequent or no experience with.

Reform of the RESPA is underway, with the end goal of making disclosures to buyer easier and more clear. That's still not a guarantee that the end result will be less complicated than what we have now, just different.

In the end, buyers need to familiarize themselves with their proposed loan, and their upcoming home purchase, and take the time to do it.

What Does the Fannie/Freddie Takeover Mean to You?

Fannie Mae (FNMA) and Freddie Mac (FHLMC) are two of the government sponsored enterprises established by the U.S. Congress to make loans and loan guarantees. They reduce the cost of capital for certain borrowers, including homeowners. They are regulated, no longer by HUD, but by a new regulator, the Federal Housing Finance Agency (FHFA) under the recent reorganization signed into law in July by President Bush.

The 12 GSE banks which also help finance housing are also a cause of concern to those who "worry that the rapid growth of other government-sponsored enterprises, most prominently the 12 Federal Home Loan Banks, eventually might create headaches for the financial industry and American taxpayers." The home loan banks, which were created during the Depression amid a wave of bank failures, have lent billions of dollars to banks and thrifts that are themselves exposed to troubled home loans.

In terms of names we recognize (per a New York Times article) "Washington Mutual, the nation’s largest savings and loan, nearly doubled its borrowing from the Federal Home Loan Bank System over the last year, to $47.7 billion, according to government filings. The Wachovia Corporation has also ramped up its borrowing, in part because of its acquisition of Golden West, a big California lender. In 2007, before it was sold to Bank of America, the Countrywide Financial Corporation took out more than $53.2 billion as it fought to stay afloat." Perhaps you've noticed the TV ads to bring in new customers--the mortgage side of some banks is struggling and they are attempting to build up their retail side with new customer accounts.

"Collectively, the home loan banks have never reported a loss in the system’s 76-year history. Many experts say the risk that lenders will fail to pay back the home loan banks is small, particularly because the loans are secured by collateral in the form of high-quality mortgages and other protections. Still, the explosive growth of the system concerns some analysts, who worry that the loan banks enable overly aggressive lenders to continue to make loans. "

On the other hand, the GSEs hold nearly half --or $5 trillion-- of all mortgages in the U.S. and account for almost all of the new mortgages in California, and one question is, will a privatized Fannie and Freddie change the availability of the fixed 30-year mortgage? The lack of institution-based mortgage securities may mean more expensive capital, and more expensive home loans. This will greatly affect the markets in areas such as California and reduce homeownership, if these GSEs are not allowed to carry out their basic mission?

Bay Harbour, Long Beach--Finding Your Next Home

Bay Harbour's private residential area near Alamitos Bay was developed by Warmington Homes in the 1980's. If you're looking for larger single family homes near the cool ocean breezes and great association amenities, this could be for you--plenty of opportunity for exercise with lovely greenbelts, three tennis courts, two pools and spas, and a 24-hour "guard shack" at the gated entry.

Of 198 homes, seven are currently on the market (see map locations) and range in size from about 2500-3000 sq. ft., depending on the plans. These three- and four-bedroom plans in contemporary Tudor and Mediterranean architecture are open and contemporary layouts designed for gracious living and entertaining. Many features include: cathedral ceilings and crown molding, central air and heat, open family rooms, double-side fireplaces, laundry room, walk-in closets, patios for outdoor dining, direct access from garage and many more individual upgrades with specific properties.

Low HOA fees are another great feature of the association. (Compare to the much higher $400-$500/month fees for luxury condos along Ocean Blvd.)

For current listings, please contact me by phone or e-mail. Asking prices currently range from the higher $900,000s to about $1,500,000, a great price range when comparing to other properties of that size and general location!
Or, to see current listings right now in Bay Harbour, please go to my Long Beach Condos, Lofts and Association Homes link for Bay Harbour.

Julia Huntsman, Broker
01188996

Buyer Affordability--Loans vs. Price Decrease

The good news is that more buyers don't need as much annual income in order to qualify, but what about loan qualification?

First of all, price drops are out there, especially with condos. If a condo is for you, this is the time to start examining your options. Right now, a qualified buyer could find a one-bedroom condominium in Belmont Heights for as low as $190,000 with dues at $252/month, and downtown prices start even lower at $75,000 for a studio with dues at $126/month. If you prefer a single family home, try a lovely 2 bedroom/1 bath home in Lakewood's Carson Park area (no REO or short pay) for $349,000.

The really good news is that the qualifying income needed is also much lower than a year ago: $62,870 annual income will now buy a home selling at $329,000, so even less income will be needed for that one-bedroom condo. See the August 19 affordability report from California Association of Realtors for the second quarter of 2008.

But next, suppose you don't have a lot of cash saved up for down payment. Let's face it, mortgage lending is returning to more traditional parameters, with the departure of lenders both large and small, the Bank of America takeover of Countrywide being one example. But 3% down is still possible for an FHA loan, which will also allow a family member (only) to assist on the down payment. Otherwise, the vast majority of conventional loans are leaning towards 10% down payment. On the other hand, there are still-valid down payment assistance programs through local cities such and Long Beach, Los Angeles, Bellflower, Buena Park, Irvine, La Mirada, Westminster, plus other sources such as ACORN, NHF Access, CalSTRS, CalHFA, and various neighborhood housing services and credit unions in Los Angeles and Orange Counties--keep in mind these programs are often driven by income levels and geographic location. However, programs allowing down payment contribution from the seller, such as the HART, are no longer allowed after the end of September.

If you would like to find out how you might be able to qualify for a loan, and one of these programs, call or e-mail me.