The drop in mortgage loan limits for conventional financing at the end of 2008 is hurting home sales and trade-up activity in higher price ranges across the country, according to the National Association of REALTORS®. The latest existing-home sales data shows sales of homes priced at $750,000 or more have declined a staggering 47 percent. http://www.realtor.org/press_room/news_releases/2009/
01/many_homebuyers_need_higher_loan_limits?lid=ronav0022
Homebuyer Tax Credit Could Offset Downturn
If all homebuyers become eligible for a tax credit without a repayment feature, it could result in an additional 555,000 home sales – enough to meaningfully draw down excess housing inventory, according to the National Association of REALTORS®. http://www.realtor.org/press_room/news_releases/2009/01/
effective_implementation_critical_for_homebuyer?lid=ronav0022
Annual Investor Report: Best Opportunities in Real Estate for the Year Ahead
Once a year, the Urban Land Institute asks more than 600 of the country’s largest real estate investors and developers one key question: Where are the best opportunities in real estate for the year ahead? Follow the link below for a quick overview of some of the investment advice.
The U.S. is “indisputably” undergoing a financial crisis, but it’s a myth that banks have cut back sharply on lending to businesses and individuals, or that lending between banks has dried up, according to a new paper by economists with the Federal Reserve Bank of Minneapolis.
Charlotte, historically, has been and still is a more stable and consistent market than most when it comes to real estate. The influx of big business and small business has caused a need for housing. Though the media doesn’t focus on this growth. They have pinpointed one of the giants, Wachovia, who is struggling and by the looks of it will have to merge with another bank.
The lending industry is distracted right now and thier focus is on repairing the holes in its systems and loss mitigation. They are not focusing on lending to people right now. Good borrowers are being turned away by underwriters who are afraid to lend. These National trends are affecting our local real estate market. But, with thousands of new residents each year coming to the Charlotte area they need homes to live in.
Sellers who can’t find a buyer right now are struggling to find out what to do with these mortgages. Granted there are not many sellers who are just wanting to upgrade. Most of them need to move, and they need a buyer. The good news is there is an option that would play the role of a buyer, the lease/purchase option.
Basically, the buyer who wants to buy, but can’t right now for some reason or another, approaches the seller and acquires a position in the property at todays prices. This postion usually costs 1-3% of the purchase price (non-refundable, but if they do close they will get credit). They also negotiate the rental agreement, which usually is for one or two years. The buyer has bought the first right of refusal, and to maintain this position they have to pay their rent on time and act like they own the property. The good side is if the property appreciates they get that equity!
What does the seller get? They get their home sold, mortgage paid with positive cashflow, a nonrefundable deposit, and they don’t have to be a landlord!
Given the fact that the mortgage industry is in distress and distracted, this is a win-win for both sides!
Here is a great site that further explains the Lease Purchase Option. http://www.lease2purchase.com/
August 12, 2008-Buying smart in today’s market got a little easier recently following the signing of the Housing and Economic Recovery Act of 2008 by President Bush. There are significant benefits aimed at helping buyers, such as a repayable first-time home-buyer tax credit. First-time buyers are important to the health of the housing economy because their home purchases help to stimulate sales up the price points. Through the home-buyer tax credit, buyers who are purchasing for the first time or who haven’t owned a property in the last three years can now qualify for a tax credit equal to 10% of their home purchase price, up to $7,500.
Further qualification requires that the home purchase be made between April 9, 2008 and July 1, 2009. The credit phases out if the buyer’s income exceeds $75,000 for an individual or $150,000 for a couple filing jointly and it must be paid back over a 15 year period in equal installments. The credit can be claimed on the buyer’s 2008 tax return even if the purchase is made in 2009 (it’s important to note that this is a tax credit and not a tax deduction).
Another component of the housing bill includes much needed FHA modernization which aims to adjust loan limits so that they are more in sync with current home values. The bill allows Fannie Mae and Freddie Mac to serve more home-buyers by raising loan limits in high cost areas above the standard conforming limit to 115 percent of the median house prices and up to 150 percent of the conforming loan limit.
The Housing and Economic Recovery Act is expected to play a critical role in strengthening the housing market and overall economy. The last time Congress passed legislation like this in the 1970s, the housing market saw a significant increase in activity. Using history as a guide, Lawrence Yun, chief economist of the National Association of Realtors believes the Housing Act could represent a boost of 10% in the number of homes sold.
The passing of the Housing and Economic Recovery Act marks the beginning phase of the next ten-year housing cycle in which prices in the more affordable markets will only continue to appreciate (affordable refers to homes priced at or below a market’s median housing price). Contributing to rising prices is population growth, the impact of Generation Y, inflation, and growth management. Homes in the more affordable price ranges in many markets have already adjusted and the new housing legislation will continue to boost this positive momentum. Increased sales in the more affordable markets will set a new foundation for housing, helping to stabilize the overall real estate economy.
Pending Home Sales Rise, Wider Gains Anticipated
Some improvement is projected for existing-home sales in the months ahead, with broader gains seen by the fourth quarter as buyers take advantage of new provisions provided through the recently passed housing stimulus bill, according to the latest forecast by the National Association of Realtors®
If Your Buyers Are on the Fence, Read This and Pass It On
If you have a prospective home buyer waiting for the bottom of the housing market, there is one factor they need to carefully consider: mortgage rates are rising. This simple consideration can beg the question, is it better to jump into the market now before it hits bottom?
I have recently started to receive questions in regards to the $7,500 Tax Credit for first time buyers. This will not apply to all new homeowners but I thought I would share, just in case it helps you, your past clients or someone you are working with now.
While I am not an expert in regards to this law I have done some research and have come up with the following information you may find helpful. I hope you find this information helpful and please do not hesitate to contact me if you have any other mortgage related questions or needs.
While it is being called a tax credit, it is actually an interest free loan.
Who is eligible? – First Time home buyers buying a primary residence who have a Adjusted Gross Income (actually a modified AGI) of less than $75,000 for single tax payers or $150,000 for those married taxpayers filing joint returns are eligible for the full “credit”. If your MAGI exceeds $75,000 for single tax payers or $150,000 for married taxpayers filing joint returns you may still be eligible for a partial credit. There is a phase-out and if your MAGI exceeds $95,000 for single taxpayers or $170,000 for married taxpayers filing joint returns you will not be eligible for a credit.
The tax “credit” can be taken in the year you purchase the house, but qualified home purchasers in 2009 may elect to take the tax credit in 2008
Home purchase must occur on or after April 9, 2008 and before July 1, 2009
“Credit” is 10% of home purchase price, but is capped at $7,500 meaning most first time buyers will get the $7,500 but if they purchase a house for less than $75,000 they will only receive 10% of the purchase price (i.e. a purchase price of $50,000 will only result in a credit of $5,000).
Tax credit will be paid back in equal payments over a 15 year period or in equal payments until the house sells and then remaining amount due will be paid in that tax year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. For example if they took a $7,500 credit on 2008 tax returns they would make their first $500 payment in 2010. You will then pay an additional $500 in taxes each and every year until you paid back the full $7,500 or until the year your house is sold in which case the remaining amount due would be paid that year.
There are many resources you can find online but here is a good website if you would like more information – http://www.federalhousingtaxcredit.com/faq.php. This website was used to gather most of the information above.
The above information is meant to provide you with some key points to the tax credit, but is not intended to be an expert opinion of how it might apply to a specific taxpayer. I am not a CPA and in no way am trying to provide anyone with any tax advice. Please consult a tax professional to determine how this law may apply to you.
So many times over the course of the year, I get asked the question, “ I heard the Fed lowered rates .25% so how does that affect my interest rate?” Unfortunately consumers are often easily misled when it comes to the subject of the Federal Reserve and how it affects mortgage interest rates.
In too many cases the media is the culprit causing the confusion. I hope this brief synopsis can help create a better understanding on how the Federal Reserve(the Fed) and interest rates are related. In the last few years, the Fed has taken action that caused mortgage interest rates to move in a direction other than what consumers expected, because the media provided weak reporting or just the attention grabbing headlines with not much substance to their articles.
The Federal Reserve affects short-term interest rate maturities, the Fed Funds rate, and the Overnight Lending rate. These factors have a direct impact on the Prime rate. If you took only this into consideration, you may mistakenly conclude that changes made by the Fed will cause a similar movement in mortgage interest rates. However, mortgage interest rates are dictated by the trading of mortgage-backed securities, which trade on a daily basis. The real dynamic at the heart of interest rate movement is the relationship between stocks and bonds.
Stocks and bonds compete for the same investment dollar on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling of mortgage-backed securities.
Unfortunately, selling mortgage-backed securities to fuel stock market rallies causes interest rates to go up, not down. Historically, there have been many times when the Federal Reserve has increased interest rates. Stocks then sell off in fear that the increase will affect corporate profit margins, and the liquidated stock assets need a place to park until the next rally comes along.
The safe haven is found in mortgage-backed securities which cause mortgage rates to drop. The daily ebb and flow of money is what matters most when it comes to the movement of mortgage interest rates. I make
it a point to continuously monitor interest rates for my clients, and advise them of opportunities to manage their mortgage debt at a better rate.
Rob Sadoff, Executive Vice President
Omni Mortgage Corporation
