First Time Buyer Tax Credit Extension-- Extended and Expanded!

The $8,000 first-time homebuyer tax credit has been extended until Spring (under contract by April 30th close escrow by June).

Not only has it been extended until the spring it has also been expanded to include buyers who have owned their current residence for at least 5 years looking to purchase a new primary residence for a credit of $6,500.

The income limits have also been raised to $125,000 for individuals and $225,000 for married couples.

The maximum purchase price must be $800,000 or less.

Has the Real Estate Market Turned?

After a positive summer and a successful-to-date fall it looks like the lower priced condos and house are on their way back up.

Summer typically is the best season for real estate in San Diego but summer ended 2 months ago and sales are still being made. The most prevalent change has been in the lower price-range of homes [houses under $350k and condos under $250k]. A year ago you could find tons of houses around San Diego for under $350k--but not anymore. The days of finding a structurally-sound, finance-able house in a safe neighborhood appear to be gone. Houses under $350k, whether bank-owned, short sale or traditional, are in bidding wars often with over 10 offers.
In the past months investors have bought many of the un-financeable properties around town, "flipped" them to suit VA/FHA financing requirements and are reselling them, attracting a desperate buyer pool frantic to qualify for the 1st time buyer tax credit and/or purchase a detached house before houses are no longer a financial option. This is great for our market; formerly trashed houses are being fixed up, more houses are becoming loan-able, owner-occupied buyers are now able to purchase these houses and investors are still making money with a short turn over.
Plans to extend the first time buyer tax credit into Spring are circulating around congress-- what will this mean for the market this Winter? Hopefully good things. We should know in the coming days or weeks all the details of this extension.

If you have any questions please do not hesitate to email me -- adegen@coldwellbanker.com

San Diego Real Estate Market-- It's getting "better"!

Good news for the San Diego real estate market is causing frustration for buyers-- Summer has shown a positive change in the housing market and prices are turning. On par with the season, with beach congestion, tourism has brought more buyers to our city which is great for our economy and real estate but it is causing buyers to frequently be "outbid" on purchases. Almost all [detached] houses priced under $300k are being sold with many offers for over asking price.

Buyers whom 3 years ago could barely afford San Diego's condo market have recently become able to purchase a detached house and a year ago could still "negotiate" the offer and price. Yes, the bulk of these sales were/are foreclosures and short sales but in the past few months low-ball offers have become a thing of the past. Sellers are under-pricing listings, allowing the buyer pool to bid up the price and determine the actual value in the property.

Conservative loans and government loans (FHA) are also restricting owner-occupied buyers from purchasing homes that need a little TLC. Cash buyers and large-down conventional purchasers are scooping up all the small fixer houses because strict loan requirements make a house with excessive peeling paint [etc.] un-loanable.

It is still a great time to buy but buyers need to be confident in their purchase, know the comps and write their offer aggressively.

Real Estate Market Turning... a bit.

Things do appear to be changing especially here in Point Loma, Ocean Beach and Pacific Beach and even more so in the condo market. Foreclosures are selling overnight and many are selling for over the list price. Of course, it is these foreclosure homes that epitimize the term "well-priced" because many of them are infact underpriced, but nonetheless things are selling and prices appear to be turning in the condo market [under $300k].

Unfortunately, there are still way too many short sale homes many of which are now following in the footsteps of the foreclosures by listing these homes well under market value leaving buyers in a blind waiting period unsure of where their offer stands. With foreclosures, underpriced or not, it is a quick process, banks accept [or reject] an offer within 72 hours, but with short sales can take up to 3 months.

Short Sales - The Truth!

Short sales are at a record high and if you are in a price range under $300k, short sales might be your only option. Are they easy? No. Do they take way too long? Yes. Will you get frustrated? Probably. Is it worth the Wait? Sometimes, yes!

Please see below for answers to all your short sale questions. Remember every bank varies, there is no protocol for short sales, yet. This information is from my experience with short sales from both selling and buying sides of a short sale transaction.

What is a short sale?
Do not be fooled, there is nothing "short" about it. Short sale means that the seller owes more money than the home is currently worth and cannot afford to make the payments anymore. Almost all short sales are homes bought between 2004-2007 in the height of the market.

What is the difference between a short sale and a foreclosure?
A short-sale is a pre-foreclosure process to help the bank avoid the foreclosure process and help a seller avoid a foreclosure on their record/credit. Short sales were orginally created to help truely distressed homeowners who had a legitimate reason they could not afford their mortgage; death, job loss, family issues, etc. The seller must submit a short sale package to their lender explaining their hardship along with bank account info and tax documents.

Why do short sales take so long?
There are several steps to this process: 1. Approval 2. Assign a Negotiator 3. BPO (Property value) 4. Accept an offer/price 5. Open 'real' escrow.

1. Approval. Because this is relatively new, banks do not have enough manpower to accomodate the massive number of short sales being requested by distressed homeowners. The bank must receive the short sale package, review the "hardship" and financial records of the seller and investigate the validity of the hardship claim.

2. Assign a Negotiator. Some banks will not review a hardship package before receiving an offer, which means they could just deny everything (in my experience I haven't encountered this issue yet). Once the selling agent receives an offer that the seller "accepts" they send the offer and the package to the bank. Roughly 2-8 weeks later the bank will assign a negotiator to review the package.

3. BPO "Broker Price Opinion" (Property Value). Because the banks are never in the city in which the property is located, the banks order BPOs from real estate agents who are not involved with the transactions, aka, unbias price appraisals. Hopefully, if the listing agent was acting in good faith and priced to property accurately, these "appraisals" come back with the correct price. This takes 1-3 weeks.

4. Approval. At this point, the bank will approve a price, the "strike price". If the listing agent has an offer at this price, things will move forward into a real acceptance. If the agent does not have this price, or has several offers in similar price ranges they will respond to all offers with a "highest and best". Highest and best offer means that all buyers will need to blindly come in with their highest offer. Every listing agent handles this process differently.

5. Open Escrow. After all parties come to an agreement, 'real escrow' will be opened which usually lasts 30-45 days.

Why don't I just avoid short sales?
In a perfect world I would never deal with a short sale again, but nothing is perfect, especially real estate. I hear several agents tell me "oh, I never show my clients short sales". Well, that makes their life much easier, but I have come to realize a large portion of my clients' price range is consumed by numerous short sales and until they tell me they don't want to spend any time with these properties it is my job to make sure they don't miss out on an awesome home that just might take a bit longer.
In my opinion, 90% of short sales are a nightmare and take WAY too long and can be a dead-end, BUT that means that 10% are successful. Personally, I have dealt with short sales that take forever (one was almost a year) but I have also been involved with a short sale that took less than 2 months from offer to close.

How can I have a positive short-sale experience?
Be patient and understand the process. If you have questions ask!

Jumbo Loan Availability = Jumbo Problem

A study was just released by the National Association of Realtors (NAR) reporting that the limited availablility of jumbo mortgages (loans over $480k) is holding back high-end real estate sales. NAR reports, in today's market, lenders are less likely to loan to jumbo-borrowers even with good credit scores and large downpayments than they are to smaller-scale borrowers with lesser credit and a higher loan-to-value ratio.
Jumbo loans, even to well-qualified buyers, are carrying a much higher interest rate than smaller loans which is leaving ready, willing and able buyers sidelined or resorting to smaller cash-only purchases.
At the top of the market in 2006, jumbo mortgages were at $480billion and now last year (2008) are down to $97billion.
This inavailability of financing is keeping the mid/high-end real estate market from its turn-around.

Meanwhile, while much of the high-end inventory is becoming stale, low-priced homes and condos are selling at record rates. It appears that lower priced condos [under $225k] and houses [under $300k] have hit rock-bottom or are very near, especially in costal areas. Of course, the biggest battle in this price range is the monumental number of short sales, many of which have multiple offers and sometimes an unethical process. Unfortunately, it does not look like short sales will be going away anytime soon.

If you have any questions about short sales or the short sale process please look at my short sale post or email me-- I am here to help.

Is the Real Estate Market Getting Better?

It looks like the housing market MIGHT be improving. In March San Diego county’s median price was $285,000 which was unchanged from February and up $5,000 from January 2009. The number of home sales has skyrocketed to 3,020 up 43% from a year ago which is the biggest increase for any March in five years per DataQuick.

Sales are improving due to current low prices (stemming from the foreclosure market) and because interest rates on loans are MUCH lower than they have been in years. In March 2008 the average mortgage payment was $1,841 compared with $1,074 in March of 2009. In the low-end market [under $300k] prices are speculated to be at or near rock bottom, but in the high end, further price declines are expected.

DataQuick reported that for all of Southern California housing sales VOLUME was up 52.1% from March 2008 while PRICES were down 35.1% and the median price of $250k was unchanged from February. This has been the trend for the first quarter of 2009.

According to the San Diego Union Tribune, analysts still caution against declaring an end to the four year housing slump in which the local median price has fallen 45% from the peak of the market in 2005/2006 and 28% in the past year. The prediction is that May and June may still be troubled months despite the summer typically being known for bringing a better market.

Another positive sign is the housing inventory [number of homes for sale] has decreased 26% from a year ago and is the lowest since 2006 per the San Diego Association of Realtors. This will hold true to the supply and demand theory, since the supply is low eventually the demand will increase and with the demand will come a change in our market. But remember, whether we are at the bottom or not, the turnaround will not be overnight, prices will not shoot up, they will level for awhile and then slowly increase.
There are still a number of foreclosures, in February 51.1% of all resale homes were foreclosure properties. These foreclosures are still driving down the median home price and are a heavy competition for all ’regular’ traditional sellers. The biggest issue with these foreclosures is they are often under-priced, exciting buyers, leading to multiple offers and a bidding war which can leave a buyer paying too much. Are foreclosures a good deal? Usually, but if the price seems too good to be true, it often is.

Sales of the higher-priced homes remain sluggish primarily because many of these sellers are not willing to price their property realistically and compete with the foreclosures. Loan availability is also more difficult in the higher price range. Judging from past declining markets we have found that high-priced homes, in general, don’t come down nearly as much as lower priced homes and condos. In this declining market, more so than usual, buyers want a steal of a deal and want that ‘foreclosure price’ even with traditional sellers.

If you have any questions or would like more information please do not hesitate to ask, we are here to help!

First Time Home Buyer Tax Credit

Refundable First-time Home Buyer Credit.

Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).

The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years.

Prices Still Fall But Sales Are Up!

Once again the real estate market is continuing its decline, but the positive news is the quantity of home sales is continuing its increase, mostly as a result of the high inventory of foreclosures. Foreclosures accounted for over 50% of December 2008’s home resales activity [up from 24.3% in Dec. 2007]. The most activity is occurring in the inland markets like Riverside, Temecula and the South Bay like Chula Vista and Imperial Beach. These were the first areas to dramatically drop over a year ago with countless short sales and foreclosures. Now with prices so low buyers are taking advantage of the great buys and sales are skyrocketing.

Aside from the sales in the aforementioned markets, what does this mean for the costal/metro areas of San Diego? A year ago we were happy to see a few short sales and foreclosures here in Point Loma [Ocean Beach, Pacific Beach, Del Mar, etc.] but now things have changed, mostly in the condo market. This may mean bad news for property values, BUT it is great for investors and first time buyers. We are seeing condos under $200k in the beach areas; one couldn’t find these just one year ago. Most of these properties are actually in decent to good condition [a rare find a year ago for any short sales and foreclosures] and many are selling QUICKLY. This is the silver lining on our economic dark cloud.

Does this forecast change in 2009? Despite everyone having some outlook for this year, positive or mostly negative, I am convinced we really won’t know until it happens. The good news is the well-priced homes are selling immediately, and more sales are being made consecutively month after month. So it is definitely a great time to buy!

One of the biggest deterrents I am seeing with buyers is their concern that prices will continue their decline. Could this happen? Yes, but nobody can pick the exact time the market hits bottom & eventually [within a few years] everything will be worth more anyway. So, as I always say, don’t buy unless you can keep it for at least 3-5 years. Prices may still go down, but they will go up! Remember, too, when you OWN and pay a mortgage, the interest is tax deductible as well as the property taxes...If you RENT the rent is not tax deductible...it's just money thrown away.

More good news, interest rates are down, but lenders are being very conservative in lending jumbo loans [loans over $417k]. For example, in early 2007 jumbo loans accounted for nearly 40% of all home loans and in December 2008 only 12%. Loans are one of the big concerns with condo sales. Lenders want a minimum of 60% owner occupancy for best loans. Many of the foreclosures and short sales are of owner-occupied units being bought by investors now, so more and more non-owner occupied units are what is selling.

Happy New Year!

· Conforming rates ended in 2008 at the lowest levels since Freddie Mac started tracking them in 1971. They plunged 1.3 percent since late October—On a average loan of 200K that is a savings of 170.00 a month!

· No one knows how fast or how far rates may go down. The Fed's initial announcement at Thanksgiving knocked rates down here, into the low fives, but waves of refis impede further declines.

· Mortgage rates today for a 417K for 30 year fixed loan amount and under are currently at 5.25% no points and 4.875% at 1 point

· Rates for 417-546,250 for a 30 year fixed are 5.25at no points and 4.875 at 1 point.

· Conforming mortgage rates ended 2008 at the lowest levels in decades. One reason is that inflation is not a concern right now due to the current economic weakness and the decline in energy prices. In addition, the Fed has begun to purchase mortgage-backed securities (MBS), increasing the demand. Mortgage rates are generally determined by the price of MBS. On November 25, the Fed announced a plan to purchase as much as $500 billion in MBS, and mortgage rates have dropped significantly since the announcement. They started Purchasing this am- January 4th- Low inflation and Fed purchases of MBS are expected to continue in coming months. Along with low mortgage rates, homes have reached their best level of affordability in many years, according to the National Association of Home Builders (NAHB). The NAHB index compares the cost of paying for a home, based on average home prices and mortgage rates, to the median household income. Increased affordability allows more people to participate in the housing market, which should boost demand for new and existing homes.

· The consensus outlook is that the economy will begin to improve during 2009. In addition, both the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR) expect the housing market to improve next year. The NAR predicts that both the number of existing home sales and home prices will increase in 2009. The combination of a rebounding economy, low mortgage rates, and affordable home prices provides good reason to expect an improved housing market in 2009.