Today Congress passed a new extension and expansion of the Home Buyer’s Tax Credit. It is before the President for his signature, anticipated within the next couple of days. There are some changes to the tax credit which you can view here: Comparison Chart of Home Buyer Tax Credits. Questions? Contact us today!
Isn’t it time for encouraging news? Well here it is:
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Posted: Monday, November 2, 2009
 The housing market continues to steam forward.
As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.
It’s the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.
A Pending Home Sale is a home under contract to sell, but not yet closed. It’s the precursor to an Existing Home Sale.
Trade group data shows that nearly 80 percent of “pending” homes close within 2 months. The majority of those remaining close within months 3 and 4.
When the Pending Home Sales Index rises, it tells us that market activity has picked up. September’s data confirms what we’ve been noticing since February — the Buyers Market is ending.
With more homes under contract in the marketplace, homebuyers typically face one or more of the following:
1. Competitive, multiple-offer situations
2. Reduced purchase price leverage over sellers
3. Fewer seller concessions
Therefore, if you’re buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. It should result in higher home prices, too
Indeed, we’re already seeing it.
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Are Short Sales Really the Next BIG THING?
By Rick Sharga
If you believe the hype, it appears that the next phase of the housing market recovery is going to rely heavily on short sales to help remove distressed properties from the home sales pipeline.
A “short sale” is a sale where the bank accepts as full value a price that’s less than what’s owed on the property. The debt is forgiven (although not always without some tax consequences), a foreclosure is avoided, a buyer gets a good deal on a property, the bank saves thousands of dollars in legal fees and the real estate agent makes a commission. Elegant. Practical. Simple. But as we’ll see later, not really quite so simple.
Short sales were never intended to be a mass market solution. Rather, they were relatively rare occurrences that took place when an unfortunate homeowner had a financial catastrophe — a job loss, a divorce, a medical problem — at precisely the same time his or her home lost significant value. When that happened, a loss mitigation manager at a bank would research the market, review the homeowner’s financial documents, carefully consider whether the borrower and loan in question met the criteria to justify a short sale and act accordingly.
This approach worked well when there was one request a week or a few a month. But with over 1.1 million homes in various stages of pre-foreclosure in the RealtyTrac database, the workload for these loss mitigation managers has exploded from several a month to hundreds a week, with no drop-off in the amount of paperwork or research needed. So there are unavoidable delays in simply processing the volume of paperwork.
But it gets worse. Each lending institution has slightly different versions of short sale forms. Property valuations, even — perhaps especially — appraisals, are in a state of flux, so loss mitigation managers are at a loss to know whether a short sale offer is reasonable or just plain silly. And there are some accounting issues: in many cases, lenders may opt to decline a good short sale offer today so that they can defer the loss (even though it may be a much greater loss) to a subsequent quarter — or even later.
And there’s more. A second loan on a property makes it much more than twice as difficult to execute the sale. The second loan either needs to be negotiated away completely, or satisfied with some nominal payment. In other cases, the holder of the primary mortgage may find it better financially to foreclose, wipe out the second lien, and simply use that amount as a discount to sell the property at a profit. Similarly, if there’s mortgage insurance on the note, the investor may decide it’s better to foreclose, collect the insurance, and let the insurer worry about getting value for the house.
So why all the hype? Well, with the REO pipeline clogged and choking, and loan modification programs failing to make a dent in foreclosure numbers, short sales represent an opportunity to feed the demand for discounted properties while reducing the number of foreclosures. What can you do to help make this happen? What does the government have in mind? We’ll cover all that and more in next month’s column.
Everyone has heard about the possibility of Congress extending the first-time home-buyer credit into 2010. That, no doubt, would help in moving the housing inventory. Take a look at this Bloomberg article regarding the possible Extension of the First-time Home-buyer Credit:
Senate Democrats indicate that First time Homebuyers Tax Credit will be renewed until at least April of 2010!
Good news! It appears that Senate Democrats have recognized the tremendous value of the First Time Homebuyers Tax Credit and that it will be renewed soon. At this time, it is believed that the credit will allow anyone purchasing (even if the property is not closed) a home by April 30, 2010 to participate and receive the full credit available. The credit will be continued (but reduced by 2% each 90 days) through the end of 2010! The credit will be slightly lessened, but it will be renewed and this extension should allow the market to continue to recover into and through next summer’s selling season. Of course, there’s always the possibility that it could be renewed at that time, as well.
Here’s the text of the story as reported in Bloomberg News today:
Senate Democrats on Board with Credit Extension
Senate Banking Committee Chairman Chris Dodd (D-Conn.) says Senate Democrats have agreed to extend the first-time home buyer tax credit. The latest version extends the program to home sales signed — not closed — by April 30. Purchasers would have another 60 days to close the sale. The credit will also be expanded to include so-called step-up buyers who have lived in their current home for at least five years.
The credit would be cut slightly to a $7,290 cap. Income eligibility for first-time home buyers would stay the same, but it would rise for step-up buyers to $125,000 for individuals and $250,000 for couples.
Source: Bloomberg News, Dawn Kopecki and Ryan Donmoyer (10/27/2009)
The second quarter report was recently published by the Northern Nevada Regional Multiple Listing Service (NNRMLS). After reviewing the information, I thought this would be of interest to you. It includes data for each of the counties within our MLS area. To review the report, click here: Market Watch Report 2nd Quarter 2009. Thoughts and comments are always welcome.
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