Tax Credit Quandaries Answered

The complexity of new home buyer tax credits leaves potential buyers with many questions. Here are answers to some of the most confusing:


How does a current home owner qualify for the $6,500 credit?

Buyers must have lived in their homes for at least five out of the last eight years. The home they buy must become their primary residence, but buyers don’t have to sell their previous home. They can use the previous home as a rental or a second home and still claim the credit.


Does the new home have to be more expensive than the one the buyer currently owns?

No. It is fine to use it to downsize. If the property sells for more than $800,000, the buyers don’t qualify.


Can buyers who are building a new home claim the credit?

Yes, although the contract must be in place by April 30 and the buyer must move in by July 1.


Can buyers claim the credit if they purchase a home from a relative?

No. The legislation prohibits taxpayers from claiming the credit if the sale is between “related parties,” including parent, grandparent, child, or grandchild.

Source: USA Today, Sandra Block (11/24/2009)

Home Buyer Tax Credit: 10 Things to Know

SmartMoney
T he Tax Guy by Bill Bischoff

On Nov. 6, the president signed 1 the new Worker, Homeownership, and Business Assistance Act of 2009 into law. The
centerpiece of this legislation is the extension and liberalization of what is now inaccurately called the first-time home buyer credit.
Here are the 10 most important things to know about the revamped credit.

1. New purchase deadline extends into 2010
The home buyer credit was previously scheduled to expire on Nov. 30, 2009. The new law extends the deal to cover purchases of
U.S. principal residences that close by April 30, 2010. However, if a home is under contract on that date, the deadline for closing is
extended to June 30, 2010.

2. Existing homeowners can now qualify
The new law allows a reduced credit for existing homeowners who buy a replacement U.S. principal residence after Nov. 6, 2009.
The credit equals the lesser of: (1) $6,500, or (2) 10% of the price of the replacement home, or (3) $3,250 for a buyer who uses
married filing separate status. The new existing-homeowner credit is only available for purchases that close after Nov. 6, 2009. To
qualify, the buyer must have owned and used the same home as a principal residence for at least five consecutive years during the
eight-year period ending on the purchase date for the replacement principal residence. If you’re married, your spouse must pass
this test too (whether or not you file jointly).

3. Larger credits still allowed for first-time buyers
Before the new law, the home buyer credit was only available to so-called first-time buyers, which means someone who had not
owned a U.S. principal residence during the three-year period ending on the purchase date for a home that will serve as the
buyer’s new principal residence. If you’re married, both you and your spouse must pass the three-year test (whether or not you file
jointly). These first-time home buyer rules still apply for purposes of claiming a larger credit of up to $8,000. Specifically, the credit
for a first-time buyer still equals the lesser of: (1) $8,000, or (2) 10% of the home purchase price, or (3) $4,000 if you use married
filing separate status.

4. Higher-income folks can now qualify
The home buyer credit is phased out (reduced or completely eliminated) as income goes up. However, the new law significantly
raises the phase-out ranges so that many more higher-income buyers will now qualify.
* For purchases after Nov. 6, 2009, the phase-out range for unmarried individuals and married folks who file separately is between
modified adjusted gross income (MAGI) of $125,000 and $145,000 (way up from the old-law range of $75,000-$95,000).
* The phase-out range for married joint filers is now between MAGI of $225,000 and $245,000 (way up from the previous range of
$150,000-$170,000).

5. New $800,000 purchase price limit
For purchases after Nov. 6, 2009, the credit can only be claimed for a principal residence that costs $800,000 or less. So if your
new home costs $800,001, the credit is completely off limits (but I doubt too many people will feel sorry for you).

6. No more credits for kids or dependents
For purchases after Nov. 6, 2009, the home buyer must be at least 18 years old on the purchase date to qualify for the credit. Also,
no credit is allowed for a buyer who can be claimed as a dependent on someone else’s Form 1040 for the year of the purchase.
These new rules are intended to shut down the practice of claiming the credit for youngish buyers who really don’t even have
incomes of their own (like college students who use money from their parents to buy a pad near campus).

7. New anti-fraud rules
A recent government report said the IRS has already identified over 100,000 returns with potentially fraudulent home buyer credits.
This is hardly surprising when the government is willing to give away up to $8,000 in free money to anyone who files a return, even
when that person reports no income. Believe it or not, absolutely no documentation was required to claim the credit, until now. For
credits claimed on 2009 and 2010 returns, buyers must attach a properly executed real estate settlement sheet to the return. Also,
Published November 11, 2009
credits claimed on 2009 and 2010 returns, buyers must attach a properly executed real estate settlement sheet to the return. Also,
the IRS can now simply disallow credits in fishy circumstances (like when it appears the $8,000 credit is being claimed by someone
who already owns a home).

8. Credits can still be claimed on prior-year returns
Under the revamped rules, you can still claim the credit for a 2009 purchase on your 2008 return (although you would now
generally have to file an amended return to do so). You can also claim the credit for a 2010 purchase on your 2009 Form 1040.
This allows you to cash in on the credit sooner rather than later, and it may also allow you to claim a larger credit if your income in
the year of purchase is higher than in the preceding year.

9. Credits must still be repaid in some cases
Under old-law rules for homes purchased between April 9, 2008 and Dec. 31, 2008, buyers are generally required to repay the
credit over 15 years. However, this repayment rule is generally eliminated for purchases after 2008. That said, you might still have
to repay the credit if you sell your home within three years of the purchase date or stop using it as your principal residence during
that period.

10. Special rules for military service members
For military service members on extended duty outside the U.S., the new law lengthens the deadline for closing on home
purchases for an extra year, to April 30, 2011 (or June 30, 2011 for homes under contract on April 30, 2011). The new law also
waives the credit repayment rules for service members who are forced to move due to receiving new orders. The same special
rules apply to members of the foreign service and intelligence communities.


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Transfers of Base Year Value for Homeowners 55 Years and Older or Disabled

(As Always...Consult Your Financial Planner or Tax Attorney First - Steve T.)

Homeowners who are at least 55 years of age may transfer the base year of their existing residence to a new residence within the same county under certain criteria.

Homeowners who are at least 55 years of age may transfer the base year of their existing residence to a new residence to another county if the other county has adopted an an enabling ordinance. The California Board of Equalization issues letters listing the counties that have enabling ordinances. The link to the most recent BOE Letter is:

LTA 2004/65 REVENUE AND TAXATION CODE SECTION 69.5 ORDINANCES

Homeowners who are severely and permanently disabled may transfer an existing Prop. 13 factored base year value to a replacement residence, if certain qualifying conditions are met. Some counties have not adopted local ordinances to implement Prop. 110. Before attempting to transfer your base year value to another county under the provisions of Prop. 110, you should contact the local county Assessor to discuss eligibility.

James Bone, CPA, MBA, CMI
James Bone’s CV

How Appraisers Reach Their Property Value Estimates

Here are some of the factors that appraisers Joni L. Herndon of Real Property Analysts/Gulf Coast in Tampa, Fla., and John A. Hillas of Hulbert & Associates Inc. in Modesto, Calif., say they consider when determining value.

Incentives and concessions. Most of today’s buyers expect to pay the lowest possible price and still get some extras. Sellers and home builders are offering money toward closing costs, remodeling and decorating, upgrades, and association dues. The price set initially may not be the final price once concessions are factored out. Appraisers care about that final number.

Closing date. Forget what comparable neighborhood houses sold for a few months back. Appraisers want prices from the most recently closed transactions. “If a sale was more than 45 days ago, even 35, the price may be irrelevant,” Hillas says.

Condition and curb appeal. Appraisers typically find several properties with similar interior and exterior features to determine value. When markets are healthy, blemishes matter less, but when markets soften, problems—a dated kitchen or barren lawn—can reduce prices and deter buyers. “The difference in value is not just the repair costs but the time and hassle to make them. It’s better for sellers to do work in advance,” Hillas says.

Foreclosures. Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market, says Herndon. “But when several neighborhood homes are abandoned, it’s hard not to caution sellers that this is a troubling trend and may affect home values,” she says.

Changing demographics. If a house is in an up-and-coming area, the value can be expected to rise. A location that’s perceived as safe also may help attract the increasing number of single female buyers.

Economic clouds. If there’s an oversupply of comparable homes for sale, or if the local job market is suffering, buyers may be hesitant to invest. Hillas advises setting prices aggressively from the get-go.

Chemistry. It’s hard to account for those times when buyers fall in love with a house, despite a high price, poor condition, or tough economy. “Emotional attachment is a factor that can’t be predicted,” says Herndon. Hillas agrees, “It’s what makes it harder to appraise homes versus commercial buildings, where buyers care more about the bottom line.”

Barbara Ballinger is a freelance writer for REALTOR® magazine.

BofA Struggles With Loan Modifications

Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.

But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program."We're sure working hard," said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company's low success rate. "We don't want to be down there.

"There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.

Source: Washington Post, Renae Merle (10/12/2009)

Foreclosures Hitting Pricier Markets Harder

Foreclosures Hitting Pricier Markets Harder Foreclosures have worked their way through modest neighborhoods and are now hitting higher-priced markets.Data from Zillow.com suggests that foreclosure rates are rising for homes in the top-third of housing values, while the bottom-third of housing now accounts for 35 percent of foreclosures, down from 55 percent in 2006.The rising number of foreclosures among more expensive homes mirrors the increase in foreclosures among prime borrowers. More than 58 percent of foreclosure starts in the second quarter were prime loans, up from 44 percent in 2008, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosures, down from half the previous year.Foreclosures are unlikely to level out until late in 2010, says Stan Humphries, chief economist for Zillow.

Source: The Wall Street Journal, Nick Timiraos (10/12/2009)

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A Historic Time to Buy

Young people just starting to invest and buying their first homes are potentially the winners in this recession.First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent."We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."

Source: The Associated Press, Chip Cutter (10/05/2009)

$30 billion home loan time bomb set for 2010

Carolyn Said, Chronicle Staff Writer
Sunday, September 20, 2009

Thousands of Bay Area homes have a ticking time bomb embedded in their mortgage. The homes were purchased with loans known as option ARMs, short for adjustable rate mortgages.
Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures - and home-loan data show that the risky loans were heavily used in the Bay Area.
From 2004 to 2008, "one in five people who took out a mortgage loan (for both purchases and refinancing) in the San Francisco metropolitan region (San Francisco, Alameda, Contra Costa, Marin and San Mateo counties) got an option ARM," said Bob Visini, senior director of marketing in San Francisco at First American CoreLogic, a mortgage research firm. "That's more than twice the national average.
"People think option ARMs (will be) a national crisis," he said. "That's not really true. It's just in higher-cost areas like California where you see their prevalence."
Of the 10 metro areas nationwide with the most option ARMs, three are in the Bay Area, according to Fitch Ratings, a New York research firm. They are the East Bay counties of Alameda and Contra Costa, the South Bay area of Santa Clara and San Benito counties, and the counties of San Francisco, Marin and San Mateo.
Together, these areas account for the second-most option ARMs in the country, although they are still far behind the greater Los Angeles area (including Los Angeles, Riverside, San Bernardino and Orange counties), according to Fitch data.

Understated data

First American shows more than 54,000 option ARMs issued here with a value of about $30.9 billion. Fitch shows more than 47,000 option ARMs here with a value of about $28 billion. Both say their data underestimate the totals.

Why are so many option ARMs clustered here?

"In markets where home prices were going up rapidly, more and more borrowers needed a product like this to afford something," said Alla Sirotic, senior director at Fitch Ratings. Option ARMs were designed for savvy real estate investors and people whose income fluctuates, such as those paid on commission. Instead, the loans became a tool for regular people to "stretch" to buy homes that were beyond their means.
That's because option ARMs let borrowers choose to make very low payments for the first five years. During that initial period, borrowers can pick their payment option - they can pay interest and principal, interest only, or a minimum monthly payment that doesn't even cover the interest.
Fitch said 94 percent of borrowers elected to make minimum payments only. The shortfall gets added to their loan balance, which is called negative amortization. The amount they owe can grow substantially.

The mortgages 'recast'

After five years, or once the loan balance reaches a certain threshold above the original balance, the mortgages "recast" and borrowers must make full principal and interest payments spread over the loan's remaining life. Fitch said that new payments average 63 percent higher than the minimum payments, but could be more than double in some cases.
"When option ARMs recast, the payment shock is much more intense than we've seen (with other types of loans, such as subprime)," said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, a consumer advocacy group. "That makes them potentially much more damaging."
Unlike subprime loans, which were more commonly used for entry-level homes, option ARMs started out with high balances. In the five-county San Francisco area, option ARMs average about $584,000 and were used to buy homes averaging $823,000, according to an analysis of First American data.
That means they'll spawn foreclosures among upper-end homes.
"The mid- to high-end real estate market is already stranded right now," said Mark Hanson, principal of Walnut Creek's the Field Check Group, a mortgage consultant. "Any sort of extra inventory is not going to be welcome for that market whatsoever."
Option ARMs became widespread starting in 2005, which is why the recasts and higher payments will hit starting in 2010, five years later.
Joey Amacker of Newark, who works as an account manager for a catering company, refinanced his home with an option ARM for $624,000 so he could pull out money to build an addition. The friend who sold him the loan assured him that an option ARM was a safe and affordable product, he said.
Amacker said he initially made only the minimum monthly payment of $1,800, which covered part of his interest and none of the principal. The amount he owed grew to $660,000 by November 2008, according to loan documents.
Meanwhile, payments that would cover both interest and principal also escalated above his reach, said Amacker, a single father of twin teenage boys. Although he wanted to pay more than the minimum, "it was a struggle, borrowing from Peter to pay Paul," he said. His 21-year-old daughter moved in to help out, and he rented out the addition he'd built. But he couldn't keep up with the payments. He's been trying to get his bank to modify the loan, but says it doesn't get back to him. The bank did not respond to a request for comment.
Between the negative amortization and his missed payment and penalties, Amacker's total debt has ballooned to $725,000, while the house is probably worth about $500,000, he said.
"I feel so ashamed of how I could have gotten myself in such a bad situation," he said.
Like Amacker, most option ARM borrowers owe much more than their homes are worth, so they cannot refinance their way out of trouble.

'Significantly underwater'

"The average option ARM borrower is significantly underwater, so much that they don't think they'll get out," Sirotic said. On average nationwide, option ARM borrowers started out with loans for about 79 percent of their home's value (the other 21 percent may have been covered through a down payment, a second loan or a combination of the two). But now, on average, the amount these borrowers owe is 126 percent of their home's value, based on depreciation and not including the effects of negative amortization, Sirotic said. That means, for instance, someone with a $600,000 mortgage might have a home now worth only $476,000.
That could explain the ominously high default rates. Even though most option ARMs have not yet adjusted higher, 27 percent of option ARM loans in the five-county San Francisco metro area are at least 90 days past due or in foreclosure, First American said.
The option ARM scenario will unfold over several years, which offers some hope that there may be time to avert a deluge of foreclosures. The bulk of option ARMs recast dates are spread out from 2010 through 2012. Especially for the loans that recast later, it's possible that a solution will arise, either through rising home prices allowing them to refinance, or through extra intervention from the government or lenders to help these borrowers.
"This will be another factor keeping home prices from recovering," said Cynthia Kroll, senior regional economist with the Fisher Center for Real Estate and Urban Economics at UC Berkeley's Haas School of Business. "It should be a message to policymakers in Washington that there is a big group out there that falls outside the parameters of what's being addressed by current policy."

Bay Area option ARMs

From 2004 to 2008, almost one-fifth of all mortgages, for both home purchases and refinancing, in the San Francisco and San Jose metro areas were option ARMs - more than double the national average. Option ARMs were even more common in the suburban counties of Sonoma (25% of home loans) and Solano (28%). Though most option ARMs have not yet recast and hit borrowers with higher payments, they are going into default at extremely high rates. One quarter or more of all option ARMs in the regional areas are more than 60 days delinquent or already in foreclosure. Analysts say option ARM borrowers are so underwater that they may be choosing to walk away.

Metropolitan statistical area

% of all home loans originated 2004-08 that were option ARMs
% of 2004-08 option ARMs that are 60-plus days delinquent or in foreclosure
San Francisco-Oakland-Fremont (San Francisco, Alameda, Contra Costa, Marin, San Mateo counties)
19.52%
27.23%
San Jose-Sunnyvale-Santa Clara (Santa Clara and San Benito counties)
19.32%
28.36%
Santa Rosa-Petaluma (Sonoma County)
25.31%
24.94%
Vallejo-Fairfield (Solano County)
28.12%
36.91%

$584,000 Average option ARM loan in 5-county S.F. metro region

54,000Number of option ARMs in Bay Area

$30.9 billionBay Area option ARM loan balance

Source: First American CoreLogic

94%Borrowers who make minimum monthly payments

79%Average loan-to-value ratio when loans were made

126% Average loan-to-value ratio now

39.3%Option ARM borrowers who are 60+ days delinquent

Source: First American CoreLogic and Fitch Ratings
E-mail Carolyn Said at csaid@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/20/MNOR19N2B1.DTL
This article appeared on page A - 1 of the San Francisco Chronicle

Meltdown shifted real-estate market into buyers' favor

The American dream of homeownership is still attainable. Buyers just have to deal with a new set of realities.
A year after the collapse of the housing market triggered the financial meltdown, lenders are demanding more money upfront, high credit scores and proof of income. Paperwork must be in perfect order. Patience and persistence are required. And don't even bother asking about a subprime mortgage.
It's a vastly different set of rules from earlier this decade, when home prices soared and mortgages were easy to come by.
In some ways, it's a return to the standards that emerged as the World War II generation bought its first homes in the suburbs: Buy what you can afford. Stick to a 30-year, fixed-rate mortgage. View your home as a place to live, not as a piggy bank.
For people trying to sell their homes, the standards are different, too: Be patient and maybe even lower your asking price, because the balance of power has swung strongly to buyers.
Housing bubbles have happened before and, experts warn, could happen again. Already, home sales and prices are rising slowly, helped by tax breaks for first-time homebuyers. But real-estate agents, mortgage brokers, economists and homebuyers across the country say they've noticed a shift in attitudes that they expect will last for years.

NEW REALITY:

Selling your house
Real-estate agent Scott Patterson hits the gas and weaves his black Mercedes-Benz across three lanes of Interstate 95 near Plantation, Fla., holding his iPhone with one hand and the steering wheel with the other.
He is rushing to meet with potential buyers of a condo with an ocean view. When he arrives, he turns on lights and opens doors in the four-bedroom place. The prospective buyers, a couple from Venezuela, walk around, ask a few questions — and leave.
Business may be up in South Florida, but the power has shifted to the buyer. And price is the key. "If you're not getting showings, you're overpriced," says Patterson, an agent with Esslinger Wooten Maxwell Realtors.
The record number of foreclosed homes on the market gives buyers even more leverage. "They can afford to wait," says David Baran, a broker with Prudential Preferred Properties in Chicago.
Michael Davies and Nicole Anzia, of Washington, D.C., got caught in their first bidding war when they bought their two-bedroom condo in 2003. The seller fielded eight bids within five days of listing. The couple waived an inspection to clinch the deal and paid $372,000.
That was tame compared to what happened when they sold the condo two years later. They listed the property on a Thursday for $479,000 and held two open houses. More than 100 people showed up, and 11 bids were waiting for them by Tuesday. The final price: $605,000. The buyer waived the inspection, too.
When they tried to sell their home this May, things were different. They listed the house at the purchase price and received just one bid. The negotiation process took longer, and they sold at a $21,000 loss. The buyer demanded an inspection.
"We don't feel like we went from boom to bust," Davies says. "We felt like we went from boom to reality."

NEW REALITY:

Getting a mortgage
Jim Sahnger, a mortgage broker in Jupiter, Fla., still chuckles over one borrower three years ago who landed a mortgage with no down payment and two foreclosures and a bankruptcy in his past.
Now, lenders pore over bank statements, tax returns and job histories. The average mortgage application today starts three times thicker than what it was at the start of the housing boom, and often gets thicker as the process drags on.
Sometimes all the extra documentation still isn't enough. Sahnger recently had a customer with a good job and a 20 percent down payment who couldn't get a mortgage because the lender said there were too many delinquent mortgages in the neighborhood.
"Now, they want to know everything about the buyer," Sahnger says. "It's a true and full underwriting process on every particular loan."
It is common to require a down payment of 20 percent — sometimes more. And it is virtually impossible to get subprime mortgages, which were written for people with poor credit histories and helped cause the meltdown when the interest rates jumped and borrowers defaulted. In 2005, one in every five mortgages was considered subprime. This year, it's less than 1 percent.
Another category of risky loans, Alt-A mortgages, which required little or no documentation of the borrower's financial health, have plunged to $3 billion this year from $400 billion in 2005.

NEW REALITY:

Closing the deal
Mike Delano was set to buy a $785,000 home in Washington, D.C., until he learned his lender now required a 20 percent down payment instead of 10 percent.
Unlike in years past, there was no wiggle room. He had to raise the extra money from his family. "It was a nightmare," he says.
It's not uncommon nowadays for closings to take 60 days. One big reason: Appraisers have become more strict — or, some would say, more accurate.
During the boom years, agents and brokers often pressured appraisers to "hit the number" that the buyer and seller had agreed on so the deal would close and everyone could collect fees.
Under new industry rules, mortgage brokers are barred from ordering appraisals. Instead, lenders order them appraisals in-house or hire independent firms.
Some real-estate agents and homebuilders say the rules are causing delays in closing sales, or undermining sales because appraisals are coming in too low.

NEW REALITY:

The future
Nearly everyone in the real-estate industry agrees on this much: Another dramatic boom-bust cycle isn't likely soon. Albert Saiz, assistant real-estate professor at the University of Pennsylvania's Wharton School, expects that new regulations and a different consumer mindset will help real estate return to a more traditional cycle.
There will be some ups and downs, Saiz said, but in the long run, prices should move higher. "In the end, the United States is still growing," he says. "We're going to need more housing."
Pava Leyrer, president of Heritage National Mortgage in Michigan, notes that the majority of people are still paying their debts. She's confident the market will rebound once the unemployment rate begins to fall.
"I really can't imagine we would go back to the same situation because it took an exact wrong mix of everything for that to occur," she says. "If it ever did happen, I'll be long dead."

By ADRIAN SAINZ
The Associated Press
Copyright © The Seattle Times Company

Mortgage Applications Rise as Rates Fall

Mortgage rates declined last week, triggering a dramatic jump in mortgage applications. The Mortgage Bankers Association reported that its weekly index of mortgage application volume rose 17 percent on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, the index increased 15.8 percent and was up a whopping 64.5 percent compared to the same week a year ago.Much of the increase was in refinances, with the refinance index increasing 22.5 percent, the biggest jump since March. The purchase index rose 9.5 percent, which was the largest gain since early April.

Mortgage rates were down across the board:

30-year fixed-rate mortgages decreased to 5.02 percent from 5.15 percent.

15-year fixed-rate mortgages decreased to 4.45 percent from 4.57 percent.

1-year ARMs decreased to 6.69 percent from 6.71 percent.


Source: Mortgage Bankers Association (09/09/2009)

Home Buyer Tax Credit Countdown Begins

The first-time home buyers tax credit ends Nov. 30. Is it possible to buy in the next two weeks and still close in time to collect it?Some professionals say yes. “It still can be done in six weeks," says RE/MAX Town & Country associate Lynn Ayers in West Chester, Pa.Economist Kevin Gillen of Econsult predicts a mad rush to close as the deadline nears.Bruce Hahn, president of the American Homeowners Grassroots Alliance in Arlington, Va., is pushing for an extension and an expansion of the credit. Legislation to do that is critical, he says, because the recovery has so far been mostly jobless and people need more time to get their feet on the ground in order to buy.

Source: Philadelphia Inquirer, Alan J. Heavens (08/31/2009)

FHA Loans on the Rise

FHA Is Having Busiest Year Ever About 25 percent of all new mortgages are backed by the Federal Housing Administration in what will probably be the busiest year yet for the federal agency.

Applications for FHA mortgages rose 50 percent from last October through mid-August 2009 and approvals for purchases, refinancings, and reverse mortgages rose 70 percent to 1.67 million.

FHA loans "are one of the most important sources in this market," says Mark Zandi of Moody's Economy.com. "Without FHA, the housing slide would be much more severe. We wouldn't be talking about a recovery now. We'd still be talking about a crash."Some analysts are concerned about the risk the FHA has taken on, but others point out that borrowers with FHA-insured loans now have an average credit score of 690, compared to 630 two years ago. Borrowers with a credit score below 500 must come up with a 10 percent down payment.

Source: USA Today, Stephanie Armour (09/02/2009)

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Now's the Time to Buy in Real Estate

Investors are returning as the real estate market recovers. BusinessWeek’s real estate guru Marc Roth points out these opportunities, which he says make sense if investors are willing to look over the property carefully and ask tough questions. Options they should consider include:

-Buying a single-family house. This could be a first home or a dream home or a home to rent out.

-Buying a multi-family investment property.

-Snapping up a vacation property. There are deep discounts to be found in high-end resort areas.

-Investing in a Real Estate Investment Trust. REITs were hit hard in the downturn, but many are on their way back.

Source: BusinessWeek, Marc Roth (08/26/2009)

Existing Home Sales Up in California

By WSJ Staff
Jim Carlton reports from San Francisco:
Sales of existing single-family homes in California increased 12% in July from the same time a year ago, as the state’s median price rose for the fifth straight month.
Sales increased to 553,910 on a seasonally adjusted, annualized basis from a revised sales pace of 494,390 in July 2008, according to a report released Tuesday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 3.9 months supply in July from 6.9 months at the same time a year ago.
Median prices were off 19.6% from July 2008 to $285,480, but were up 3.9% from June—continuing a string of back-to-back sequential price increases that began in March. Officials with the Realtors’ group credited first-time buyers for much of the buying volume, helping the under-$500,000 segment of the market to jump to include 74% of statewide sales from 43% when the California housing market went into a slump two years ago.
Few experts say California’s housing market is out of the woods, though. One threat is the prospect of more foreclosures flooding the market, as the state struggles with an unemployment rate of 11.9% as of July.
And Realtors’ officials say they are concerned sales have become overly tied to first-time buyers and a federal tax credit they have used for their purchases. Indeed, James Liptak, president of the association, said nearly 40% of first-time buyers said they would not have purchased a home without the tax credit, and called for Congress to extend it beyond a Dec. 1 deadline as well as open it up to all buyers, not just first-timers.
Leslie Appleton-Young, chief economist of the association, said the high end of the California market remains soft with weak sales and prices as credit remains tight for jumbo loans.

First-Time Buyer Tax Credit Extension Possible

Bills to extend the maximum $8,000 tax credit for first-time home buyers, which expires Nov. 30, are pending in both the U.S. House and the Senate.Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, "It's something we can get done."Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing aren’t as good, observers say.

Source: Washington Post Writers Group, Kenneth R. Harney (08/22/2009)