The Cost of Waiting to Buy Revisited

Six months ago (they've passed quickly), I covered this topic via an article by Pat Zaby complete with payment scenario.

Last week's upset in the Treasury bond market , a more complex subject, ultimately sent mortgage interest rates up, with higher payment impact, that the earlier post referred to:

Let's make an assumption that the prices may still decline 5% more before they start appreciating again. If while a buyer was waiting for the price on a $250,000 to go down 5% to $237,500, and the interest rate goes up one percent from 5.25% to 6.25%, which is entirely possible, the buyer's monthly payments will increase almost $79 per month.

Or putting it another way, some buyers who qualified before last week may now have lost as much as 10% of their original buying power. In fact, some mortgage professionals feel that because of the current economic forces driving the purchase of bonds vs. mortgage-backed securities, the edge on low interest rates--below 5%--is gone, and maybe gone for good. If you're just starting in the market, figure it's the luck of the draw. But if you've been looking for a very long period of time, or renewing your search after being away from it for a long time, your loan information probably needs to be updated.

One brighter spot is that the procedure is being put in place for the imminent start of a statewide down payment assistance program offering a "silent second" for first time homebuyers (up to 3% of purchase price, income restrictions apply, FICO score over 680) and which may be used in conjunction with the FHA 3.5% down payment. If you're in that category, you might still be ahead if you fit this program.

See my earlier post on waiting to buy.

$8,000 Tax Credit is Once Again a Help With Costs for 1st Time Buyers

There has been much confusion in the past several weeks about using the credit for a down payment, as HUD announced a tax credit but then rescinded the offer.

Now, the latest information from HUD (May 29th) is now that the $8000 tax credit for FHA borrowers "may not be used to meet the 3.5% minimum downpayment, but may be used as additional downpayment, buying down of interest rate, or other closing costs." The HUD credit may not be used in place of your 3.5% down payment, but you may use it to cover closing costs, or as a loan through specified programs set up by lenders.

This is a great opportunity for first time buyers to buy real estate in the Long Beach area with additional some financial assistance!

Give me a call to learn how to utilize this program to your best advantage!

Back to Reality--No Using the $8000 Tax Credit for Down Payment

This has already been addressed in many other quarters, but just for the record, I'm including it here: Apparently, the HUD letter ML 09-15 has been rescinded as of last Thursday morning because it violated a federal law effective as of October 1, 2008, and now there's just a big blank space on NAR's site where the announcement used to be. The fact is, FHA loans do not allow for down payments that in themselves are loans, but may allow for gift down payments from certain sources as spelled out in FHA guidelines.

So the $8000 credit-as-down-payment is NOT going forward. And, for the ML 09-15 proposal to occur, there would have to be in place:

--State agencies approved WITH MONEY for the downpayment
A change to the HUD guidelines on the timeframe that is allowable for a loan….currently must be amortized over 10 years with no balloon.
--A change to the IRS guidelines allowing your refund to be assigned to a state or non-profit entity.
Source - Tara Ryan, Primacy Mortgage

In the meantime Buyers, you have until December 1, 2009 to otherwise utilize the $8000 tax credit.

California's New Home Tax Credit for $10,000

Announcement from California Association of Realtors: (NOTE: As of this morning, well over half of the $100,000,000 funds for a new home purchase are now committed, although not paid out. Buyer must close escrow, and then apply with 7 days after close of escrow.)

"This tax credit is available for qualified buyers who on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.

"The FTB began accepting applications for allocation of credit by fax only (916.845.9754), on March 1, 2009. They began processing the applications on a first-come, first-served basis, on May 1, 2009. The processing delay was necessary to allow them time to develop a system to capture and verify the application information, allocate the credits, and send the credit allocation letters. It will take at least a few weeks to process all the applications they received and mail credit allocation letters. Please be patient and do not send applications more than one time.
California allocated $100,000,000 for this tax credit. Buyers must apply for credit allocation from the FTB. They will review applications and allocate credit on a first-come, first-served basis. Once $100,000,000 has been allocated, the tax credit will no longer be available. They expect to report total credit allocations allowed beginning May 15. Until then, they will continue to report data on applications received. "

Doesn't the fact that over half the funds are now committed since March 1 show the increase in buyer purchases?

First Time Buyers: $8,000 Credit May be Used as an FHA Loan Down Payment

First-time homebuyers: Get the fast road to your $8,000 tax credit. Shaun Donovan, secretary of Housing and Urban Development (HUD) announced on May 12 that Federal Housing Administration (FHA) will allow its FHA lenders to allow homeowners to use the $8,000 tax credit as a down payment.

Secretary Donovan said.

'We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment.' According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Rather than waiting for refunds after the closing, funds will be available at the closing. A second mortgage will be filed and repayment terms will vary. It is important to keep the home as a primary residence for at least 3 years.

Q&A summary of other requirements for this credit:

Who Qualifies?
First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009.
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 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Will the Credit Be?
The maximum allowable credit for home buyers is $8,000. Each home buyer's tax credit is determined by two factors:
a) The price of the home-the credit is equal to 10% of the purchase price of the home, up to $8,000.
b) The buyer's income-single buyers with incomes up to $75,000 and married couples with incomes up to $150,000-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 $75,000 and $95,000 for single buyers and between $150,000 and $170,000 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 $95,000 for singles and over $170,000 for couples are not eligible for the credit.

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 the three-year period, the credit will be recouped on the sale.

Properties are Selling in Long Beach 90803

The buyers have gotten in the Spring action mode in Long Beach's 90803 zip code--and for some buyers, there are issues of multiple offers in certain parts of Long Beach within days of the property coming on the market. This is a result of the combination effect of sellers pricing their property correctly, presenting it well (even staging it, that's been betting the fastest offers), and buyers who are pre-approved and motivated to buy.

In a quick review of the MLS, in the 90803 zip code (Naples, Belmont Heights, Belmont Shore areas), there are 101 active single family home listings waiting for a buyer, and there are 30 single family homes currently in escrow, list price between $425,900 (Island Village) to $3,350,000 on the water with a boat dock (Naples)--days on market ranged from "0" to "395".

In the same area are 54 condos waiting for a buyer, ranging from $189,000 to $1,095,000 in complexes such as Marina Pacifica, Village on the Green, Bixby Village, Spinnaker Cove, and in areas of Naples, Bluff Park, the Peninsula, and Belmont Heights. There are 19 condos in escrow, ranging up to $669,000 in asking price, having been on the market from 3 days up to 364 days.

For motivated sellers, believe it or not, we need more inventory. If you would like a market analysis of your home or income property, at no obligation, there's nothing to lose by talking over the current value of your home. I can even send you market comps via e-mail, plus other valuable market information.

Prices are still low, and motivated buyers should check out their financing options now.

To find more Bixby Village properties on the market, go to Long Beach Condos, Lofts and Associations, which is updated through the MLS, so you will get current information on which listings are on the market.

California Market is Speeding Up

California Association of Realtors report for March, 2009, shows a 63% increase in sales and an increase in statewide median price of 2.2% over February, 2009. The unsold inventory index fell to 5 months overall, compared with 12 months one year ago.

"The statewide median price showed the first monthly increase since August 2007, and has remained in the $250,000 range over the past three months," said C.A.R.'s Chief Economist Leslie Appleton-Young. "A number of regions around the state also have registered monthly gains for one or more months since the beginning of this year. While these are welcome signs, it remains to be seen whether home prices have stabilized.
"While we still face continued weakness in the general economy and expect continued foreclosures, the increased incidence of multiple offers indicates that first-time home buyers and investors are responding to dramatically improved housing affordability. Low mortgage rates and house prices, coupled with the federal first-time home buyer tax credit, is having a definite impact on the California housing market," Appleton-Young added.

The existence of multiple offers on residential property is reported by numerous local buyers I've talked to in the last few days in the Long Beach area, and the decline in local inventory has been very evident. Properties that are strong in curb appeal, or are staged, are getting the fastest response from buyers.
Another indicator is the number of day on market: statewide, 8 day less that this time last year to sell.

Making Home Affordable for YOU

President Obama's $75 billion program for homeowners now has the first six banks or participants, per the Los Angeles Times:

Chase Home Finance, part of JPMorgan Chase Co., will receive up to $3.6 billion, the largest amount among the six companies. The other recipients: Wells Fargo Co., GMAC Mortgage Inc., Citigroup Inc.'s CitiMortgage unit, Select Portfolio Servicing and Saxon Mortgage Services Inc.

More banks and companies will be added in the coming months. The Making Home Affordable program can be found at FNMA and Freddie Mac sites for those with FNMA or Freddie Mac loans. By clicking on the above link, the homeowner can find out eligbility for the program. This program is for owners who are not able to meet current refinancing loan requirements, who bank is participating and who who have FNMA or Freddie Mac loans.

This plan is to help people who are current on their mortgage payments to refinance and take advantage of today's lower interest rates. Under this plan, Fannie and Freddie will be allowed to refinance qualified homeowners up to a 105% loan-to-value of the CURRENT VALUE of the home. It's well worth your time to keep checking on whether or not your current mortgage and your bank, now or in the future, will be one that qualifies for this plan.

The plan helps owners at risk of foreclosure by offering government assistance to help offset the cost of modifying loans of qualified homeowners into affordable mortgages allowing them to keep their homes. There are several different ways to achieve this: rate reduction; extending loan term, or allowing principal forbearance or cramdown. The unpaid balance must be $729,750 or less for owner occupied primary residence of 1-4 units, a first trust deed, current monthly payment exceeds 31% of gross monthly income, are among the requirements. Go here for a self-assessment tool.

If you are thinking of selling, or you need more information about whether or not you can modify your loan, or are eligible for a short pay, contact me directly or go to http://www.juliahuntsman.com/.

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More Demand, More Sales--More Sales, More Buyers and Sellers

In spite of the billions of dollars spent and given away to Freddie Mac, Fannie Mae plus numerous other banks and institutions, in spite of the many government loan modification programs and federal homeowner help programs, loan streamlining programs ... but so many buyers are still reluctant to buy. Yes, there are more limitations on types of loans available, basically buyers have a choice between 3.5% down payment (FHA), 10% and 20%+ down payment loans (conventional). There are some first time buyer programs, there are still VA loans, but most buyers are going to fit in the middle of the distribution curve on the first 3 types of opportunities.

There needs to be even more incentive(s) if there is to be a return to a real estate market where there are properties closing escrow with move-up buyers. Why, especially in California which is still a higher-priced market than other states, should only first-time buyers under a certain income level be eligible for the $8000 tax credit? Why not make it available to anyone who purchases a home? or an investment property? I've been meeting people lately who have certain assets, sense that the bottom of the market may be getting closer but they're still unsure, and this credit might give them the incentive to finally make the move off the fence.



Another suggestion has been to put a moratorium on the capital gains tax for future sales of residential property purchased in 2009 and 2010 which might encourage these capable but indecisive buyers to finally make a move into the market. Yes, a strong increase in sales has been occuring in 2009, but it's also at the lower end of the market. Think of the buyer who might otherwise put an offer on a high end property if these other incentives were in place.

Free Southern California Home Buyer's Fair this weekend April 18th

Bulletin just in:

Thousands of potential home buyers are expected to converge this weekend for the Southern California Home Buyer’s Fair at the Los Angeles Convention Center in downtown Los Angeles. Sponsored by California Association of Realtors and the “Los Angeles Times,” the second annual Southern California Home Buyer’s Fair is open from 10 a.m. to 5 p.m. Saturday, April 18, and 11 a.m. to 4 p.m., Sunday, April 19. The event is free to the public. In addition, the first 200 attendees each day will receive a free movie ticket (one ticket per person).

The Fair features more than 50 educational “how-to” seminars designed to help home buyers navigate today’s real estate market with confidence and peace of mind. Seminar topics range from monitoring and fixing credit, finding and applying for a mortgage, to purchasing a foreclosure, short sale or REO. Several of the sessions also will be offered in Spanish. The Southern California Home Buyer’s Fair (www.homebuyersfair.com) also will feature nearly 75 exhibit booths, where attendees can obtain information from industry experts about homeownership and the home-buying process.

For a home search through our SoCalMLS expanded home search of all types of properties, please visit my other site at www.juliahuntsman.com