The New Homebuyer Tax Credit Won't Die --Should It?

The government has given buyers using the credit another three months to close sales, and the initiative is being imitated on a smaller scale by states and private companies. But some think the market would be better off if we laid it to rest for good.

Karen and Greg Osmon had outgrown the three-bedroom Winston-Salem, N.C., home they lived in with their two children, so they put it up for sale. Unfortunately, they did so in December of 2008, at the height of the financial crisis. With the economy in a downward spiral, they couldn't find a buyer, and when the property didn't move for over a year, they were forced to pull it off the market.
The Osmons decided to try selling again in early May of this year, but they'd missed a chance to capitalize on an incentive that had boosted home sales in the months prior: the first-time homebuyer tax credit, an $8,000 federal rebate whose April 30 deadline boosted sales of new homes in that month by 48% over the previous year, according to the Census Bureau.

For full story:
http://www.forbes.com/2010/07/01/home-buyer-tax-credit-lifestyle-real-estate-housing.html

National Home Price Index Rises:

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.

According to FHFA, their national Housing Price Index for purchases rose 0.9% and is the third consecutive month of home price increases and shows that the housing market does have some real fundamental "bright spots".

How to lower your property taxes:

Despite home prices in major urban centers decreasing 31 percent between 2005 and 2009, property taxes across the U.S. increased by nearly 20 percent. There is good news, however; homeowners can fight back.

Making sense of the story

• Homeowners should keep in mind that property taxes do not always correspond with home values, because local governments typically don’t measure values every year and some have limits on annual property-tax increases.
  
  
• As a result, current property taxes might reflect the home’s value when the market was healthier. According to the Congressional Budget Office, property-tax adjustments lag behind changes in home prices by an average of three years.
  
  
• Although homeowners cannot change their property-tax rate, which is set by the local government, homeowners can get their assessment lowered if they appeal to their local assessor.
  
  
• One key to a successful appeal is fact checking the assessor’s work. About half of all successful appeals come from homeowners pointing out an error in the assessor’s description of the home, according to one property tax expert.
  
  
• During the appeal process, which is similar to a less-formal court hearing, homeowners may present their case to several local officials or representatives. The simplest way to convince officials that a property has been incorrectly valued is to provide evidence of the sales price of homes that are comparable to the property being discussed. This should include square footage, amenities, and neighborhood characteristics. Sale documents and photos of the property in question, as well as the comparable properties also should be brought in.
  
  
• Homeowners who have made improvements or substantial changes to the property should be cautious about appealing an assessment though, as it could have negative effects and actually increase the property’s value and, in turn, the property taxes.

FHA announces loan eligibility criteria for loans in pipeline

With the Sept. 30, 2011, expiration of the current high-cost loan limits fast approaching, the Department of Housing and Urban Development (HUD), which regulates and oversees the FHA home loan program, has issued Mortgagee Letter 11-29 (ML). This ML clearly lays out how and when lenders are to implement the new loan limits that take effect on Oct. 1, 2011. According to the ML, as long as FHA home buyers have case numbers and credit approval (as defined in the ML attached below) on or before Sept. 30, they are eligible for the higher loan limits, even if the loan closes on or after Oct. 1.
While C.A.R. will continue to try to extend the current loan limits, absent Congressional action, we welcome this announcement as providing a clear and smooth transition to the lower loan limits, which is in stark contrast to the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac. FHFA has allowed lenders to implement the new loan limits on their loans whenever and however they see fit. Home buyers have been forced to shop for a lender who still will offer the higher loan limits since many lenders, including Bank of America and Wells Fargo, already have lowered their Fannie and Freddie loan limits

California home sales decline in July, but remain higher than a year ago

Closed escrow sales of existing, single-family detached homes in California dropped 4.1 percent to a seasonally adjusted 458,440 units in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. July home sales were up 4.5 percent from the 438,850 units sold in July 2010. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.


“Although July sales improved over last year, they were somewhat weaker than expected, given current prices and mortgage rates,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Economic uncertainty and recent developments in financial markets have caused hesitation among buyers, the effects of which we may see in the coming months. We must see sustained job and income gains along with an increase in consumer confidence before we can expect to see consistent improvement in the housing market.”

The statewide median price of an existing, single-family detached home sold in California dipped 0.3 percent in July to $294,230 from a revised $295,210 in June. July’s median price was down 7.6 percent from the $318,550 recorded in July 2010.

“Despite the uncertain outlook, interest rates are at near-record lows, and home prices are favorable,” said C.A.R. President Beth L. Peerce. “Well-qualified, motivated buyers who expect to own their home for more than a few years should carefully study their options now.”

Housing survey finds job loss a top concern for American workers

Concerns about job loss and increasing consumer pessimism reveal that 64 percent of Americans surveyed during the second quarter say the economy is on the wrong track, according to Fannie Mae's latest quarterly National Housing Survey.
The monthly survey found that 70 percent of respondents now believe the economy is on the wrong track, and just 23 percent say the economy is heading in the right direction.

More than a quarter (26 percent) of American workers reported being concerned about losing their job in the next year. While 44 percent of concerned American workers reported having a home mortgage (compared with 42 percent of all Americans), just 33 percent of them perceive their savings to be sufficient (versus 49 percent of those workers not concerned about losing their job).

Forty-four percent of these workers say their household expenses have increased significantly over the past year, compared with 35 percent of workers not concerned about losing their job.

Nearly three-fourths (73 percent) of single-family renters say it would be difficult to get a home mortgage, with 33 percent citing their credit history as the biggest obstacle to getting a home mortgage (versus 20 percent of multifamily renters), according to the survey.

Short sales: Are they worth the trouble?

Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.
Making sense of the story

• Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss. To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
  
  
• Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price. According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
  
  
• Home buyers wanting to purchase a short sale must have patience. In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.
  
  
• In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home. In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
  
  
• Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or forego an inspection altogether.
• Even with the challenges associated with short sales, buyers should not avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration and surprises down the line

Foreclosure myths, debunked

Although there are a number of programs available to help homeowners who have defaulted on their mortgages keep their home, the large amount of misinformation tends to result in troubled homeowners failing to contact their lender until it is too late.
Making sense of the story

• Some homeowners believe, incorrectly, that contacting their lender early in the process will draw attention to their situation and result in a quicker foreclosure. In reality, contacting the lender or servicer is an important first step, and the sooner, the better. Contacting the lender provides the homeowner with an opportunity to explain their situation and the steps necessary to deal with it.
  
  
• It is a common misconception that missing one mortgage payment will lead to foreclosure. However, the foreclosure process doesn’t begin until payments are 90 days delinquent. Lenders generally have a financial interest in keeping homeowners in their homes, so making contact as early as possible could help lenders modify terms of the mortgage or devise a repayment plan.
  
  
• Once homeowners are behind on their mortgage payments, it becomes challenging to dig out of the hole. Some homeowners try to solve this by depleting their savings or dipping into their retirement accounts to become current on the loan. Most financial experts advise against this.
  
  
• Delinquent homeowners may think they should stop making mortgage payments to get their lender’s attention, which often isn’t the case. When possible, homeowners should stay current on their mortgage payments and continue to contact their lender on a regular basis.
  
  
• Homeowners who have applied for assistance or loan modification programs in the past and were turned down are advised to reapply. Program parameters are constantly changing, so the rules might have been liberalized since the last time the borrower sought help.
  
  
• A number of free, government-sponsored housing services are available through the Dept. of Housing and Urban Development (HUD). A list of HUD-approved agencies can be found at http://www.hud.gov.

Cosigning on the dotted line

Tighter lender standards and an unstable job market have made it tougher for some people, especially those just starting out, to qualify for a home mortgage on their own. So, some home buyers are turning to family members or close friends with good credit to co-sign a home loan.
Making sense of the story

• While becoming a cosigner may seem like a good solution, money manager and lenders caution against those who are asked to be the cosigner.
  
  
• A cosigner, even if not living in the house, is really a coborrower, meaning he or she still is responsible for payments if the occupant is unable to meet his or her obligations. In other words, if the principal party defaults on the loan, the cosigner is on the hook.
  
  
• One financial planner suggests potential cosigners take a less risky alternative, such as providing a cash gift for the down payment. Under current tax laws, a person can give as much as $13,000 to a person, free of gift taxes, or $26,000 per person, if a married couple filing jointly is giving the money.
  
  
• Those considering cosigning a mortgage must conduct due diligence. First, the cosigner must understand why the family member or friend is asking for help. Potential cosigners shouldn’t be afraid to look into the requestor’s personal finances to help determine whether he or she will be able to repay the loan. Perusing credit reports also will show the track record he or she has for paying off debts.
  
  
• A discussion about worst-case scenarios also should take place before signing on the dotted line. Working out a written contract containing an agreement about what would happen in the event of a default, also is recommended.
  
  
• Cosigners also should keep in mind that the mortgage will show up on their credit report, and could affect their own ability to borrow money or buy a second home. If the principal borrower makes a late payment, that also will show up on the cosigner’s report.

B of A signs agreement with HUD over mortgage abuse

HUD has reached a settlement with Bank of America, releasing the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages. The agreement was created on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general, and other regulators over alleged mortgage origination and servicing failures.

The agreement requires the bank to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale, or other foreclosure alternative.

After such outreach, the settlement paves the way for BofA to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.

The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from BofA for unrelated origination and servicing failures.

Unemployment Improves Slightly:

The U. S Bureau of Labor and Statistics reported that the national Unemployment Rate dropped unexpectedly from 9.2% to 9.1%.

U.S employers hired more workers in July alleviating immediate concerns over another potential slowdown in the U.S economy. 117,000 jobs were added, far exceeding the 85,000 forecast by analyst. Adding to the positive report was an increase in wages.

Most economists believe that we need to see a net gain of 200K jobs each month to materially move the Unemployment Rate downward, but the data in this report was welcome news.

Housing demand is more closely tied to employment levels than any other factor (even mortgage rates), so any improvement in this data is welcome news for the housing industry.