CNN Money for November 19, 2009

CNN Money

Make money in 2010: Your home

Following three years of declining home prices, the end of the nationwide housing slump may be in sight. Home sales consistently have been rising, the surplus of houses is shrinking, and most economists believe home values nationwide will hit bottom in the second half of 2010—but not before declining an additional five to 10 percent. That’s good news for homeowners hoping to sell or rebuild lost equity.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Mortgage rates currently are below 5 percent, and should remain low for the next few months, partially due to the Federal Reserve’s ongoing purchase of mortgage-backed securities. However, if the economy quickly turns around and inflation fears resurface, rates could rise to as high as 6.5 percent, slowing demand and pushing down home values.
  
• According to one analyst, the market will remain tilted in favor of buyers over the next year, but that power gradually will be reduced as conditions in the housing market continue to improve.

• Buyers hoping to purchase or invest in a lower-priced, entry-level home should expect some competition from investors and other buyers. To remain competitive, buyers are advised to put down as much cash as possible, as many investors are offering to make all-cash deals. Another factor to keep in mind is that offers below listing price often are outbid by others.

• Some home sellers are postponing listing their homes until the market recovers. However, timing the market is difficult, so homeowners thinking of selling should carefully weigh their options. Congress recently expanded the federal tax credit to include some existing homeowners, but they must close before June 30, 2010 to qualify. Although existing homeowners are not required to sell their current home to qualify for the credit, those who plan to rent out their current residences should be aware that many lenders require borrowers to show they are financially capable of paying two mortgages, or show rental income for at least six months. Discretionary sellers should discuss their options with a REALTOR® before making a decision.

As a side note to this article, I would like to stress the BOLD paragraph. As we hover around the absolute bottom of this market, investors are coming out with all cash offers on homes that would be ideal for first time home buyers. Unfortunately, I have seen this happen with putting in offers of 3 1/2% down and watching them get tossed to the side due to "stronger" offers. My suggestion is get pre-qualified now! Once we have that approval letter in hand we can act fast and put in our offer BEFORE these investors have a chance to make a move.

Please give me a call or email if you have any questions and I look forward to serving you!

Tax credit extended!!!

More good news for consumers, our members, and the housing market recovery. Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As you may know, C.A.R. and our partners at NAR have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation. We expect President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers. We expect that number to increase dramatically in the months ahead with this new legislation in place. Thank you to our members who called, wrote, and e-mailed their congressional representatives and voiced their support for the home buyer tax credit. Your voices were heard – today’s vote is a direct result of your actions and involvement.

Shrinking Real Estate 57% fewer homes in OC

The number of homes listed for sale continues to drop, decreasing by 174 listings over the past two weeks (down 2%). That brings the new total to 7,749 listings as of Thursday, according to Aliso Viejo broker Steve Thomas.

• The last time the Orange County housing market was this small: January 2006, when the slump was just getting started.
• Last week’s listings are down 39% from a year ago, when there were 12,790 homes for sale; and it’s down 57% from the peak (17,898 listings in September 2007).
• In addition, 3,166 new deals were signed in October, Thomas reported. That reflects a seasonal dip from this year’s selling peak of more than 3,600 new deals a month last spring.

Said Thomas:

“There is very little fresh, new inventory. The lower the range, the “spookier” it gets. Properties that are priced right and in great condition are flying off of the market with multiple offers and tremendous activity. Buyers new to the market are dumbfounded by all of the competition. Their expectations are of doom and gloom and the ability to “cherry pick” whatever home they are interested in AND at a discount. Yet, just about every agent has pockets filled with buyers who want to buy but have been unable to purchase after losing out on property after property.”

Thomas also calculates a “market time” benchmark tracking how many months it theoretically takes to sell all the inventory in the local MLS at the current pace of deal making. By Thomas’ logic:

• It would take 2.45 months for buyers to gobble up all homes for sale at the current pace, little changed from 2.43 months two weeks ago. But that’s a lot less than 5.19 months a year ago and 14.06 months two years ago.
• Homes listed for under a million bucks have a market time of 1.89 months (57 days) vs. 9.27 months for homes listed for more than $1 million.

Here’s the data, as of last Thursday, for listings; deals pending; market time in months; (note: k=thousand; m=million) last Thursday vs. 2 weeks ago, a year ago and 2 years ago …

Categories	Listed	Deals	Time (mo.)	2 wks. Ago	1 yr. ago	2 yr. ago
• $0-$250k	1,072	669	1.60	1.72	3.72	12.78
• $250-500k	1,994	1,357	1.47	1.42	3.72	12.78
• $500-750k	1,589	679	2.34	2.32	5.39	15.11
• $750-$1m	909	246	3.70	3.76	9.74	12.74
• $1-1.5m	784	132	5.94	6.46	12.40	15.02
• $1.5-2m	440	64	6.88	8.67	24.96	18.20
• $2m-4m	662	38	17.42	19.39	27.85	17.76
• $4m+	377	10	37.70	31.67	49.86	17.50
All O.C.	7,749	3,166	2.45	2.48	5.19	14.06

Ponder inventory trends:

• South County houses sell the quickest
• Shrinking real estate: 57% fewer O.C. homes to buy
• 15% price cuts move million-dollar O.C. homes
• Hardest O.C. city to find a home? Aliso Viejo!
• O.C. homes for sale drop 33% this year
• Portola Hills homes hot, Corona del Mar not
• Homeselling: Portola Hills hot; Corona del Mar cold
• Where do homes sell in less than a month?
• Fewest O.C. homes for sale since early 2006