(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
Tuesday, October 20, 2009
Sunday, October 18, 2009
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.
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.
Tuesday, October 13, 2009
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)
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)
Monday, October 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)
Source: The Wall Street Journal, Nick Timiraos (10/12/2009)
Saturday, October 10, 2009
Open House for Sunday Oct 11, a Laguna Minimalist at $3.295m
This newlyonstructed Mark Singer designed home is located in the desireable Mystic Hills area. With amazing canyon and mountain views this three bedroom and 4 bath home has a spacious floor plan, state-of-the-art kitchen, luxurious master bath, with large panoramic balconies well suited for impressive entertaining. This location is optimum for easy access to some of the most striking hiking and mountain bike trails that Laguna has to offer.
Tuesday, October 6, 2009
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)
Source: The Associated Press, Chip Cutter (10/05/2009)
Friday, October 2, 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
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
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