We received a nice thank you photo from these California First Time Home Buyers - our Chris Garza worked with them on this. Makes our Day!

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Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday. 

The White House says the President will sign it into law today.

The up-to-$8000 tax credit’s expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program’s basic eligibility requirements remain the same:

• Buyers can’t purchase the home from a parent, spouse, or child
  
• Buyers can’t purchase the home from an entity in which they’re a majority owner
  
• Buyers can’t acquire the home by gift or inheritance
  
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

For one, the definition of “first-time home buyer” has been expanded to include most homeowners with at least 5 years in their current home.  “Move-up” buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don’t have to be a true first-time home buyer to claim the “first-time home buyer tax credit”.

Other eligibility changes include:

• The subject property’s sales price may not exceed $800,000
  
• The subject property must be a primary residence
  
• Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his “normal” tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

The complete list of qualifying criteria is posted on the IRS website.  Be sure to review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2009.

It’s 5 months away.

Mortgage markets improved last week after a series of hugely volatile trading sessions. 

Rates carved out a wide range on the week, culminating in a late-Friday plunge that dropped rates by about 1/8 percent.

It was the first time in 5 weeks that mortgage rates fell.

Volatility like that of last week is nothing new on Wall Street; it’s been a running theme in 2009.  Volatility occurs when markets don’t agree on what’s next for the economy and, this year, there’s been a lot of disagreement like that.

Data has been inconsistent.  Take last week for example.

At 9:00 AM Tuesday morning, the Case-Shiller Index showed home prices rising nationwide.  Because many analysts believe housing fueled the recession, strength in the sector is widely construed a positive for the economy.

Mortgage rates rose on the news.

But then, an hour later, the national consumer confidence report revealed a substantial deterioration in sentiment versus the month prior.  The data forced Wall Street to do an about-face.

Housing is important to the economy, but it can’t affect growth like consumer spending can. When Americans are less confident about their future income, they tend to keep their wallets closed, retarding economic growth.

Holiday Shopping Season is getting underway and the last thing businesses want to see is a suddenly reserved American shopper.

This week, the volatility should continue. 

In addition to the release of key employment and housing data, the Federal Open Market Committee has a scheduled 2-day meeting.  The group’s Wednesday afternoon adjournment will influence mortgage rates.

The Fed is widely expected to keep the Fed Funds Rate in its target range near 0.000 percent, but it won’t be what the Fed does that will matter as much as what the Fed says.

If the FOMC’s press release shows optimism for the economy, mortgage rates will rise in response.  Alternatively, if the Fed appears more dour, rates will fall. 

Either way, consider locking your rate before the Wednesday afternoon announcement.

The housing market continues to steam forward.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.

It’s the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.

A Pending Home Sale is a home under contract to sell, but not yet closed.  It’s the precursor to an Existing Home Sale. 

Trade group data shows that nearly 80 percent of “pending” homes close within 2 months.  The majority of those remaining close within months 3 and 4.

When the Pending Home Sales Index rises, it tells us that market activity has picked up.  September’s data confirms what we’ve been noticing since February — the Buyers Market is ending.

With more homes under contract in the marketplace, homebuyers typically face one or more of the following:

   1. Competitive, multiple-offer situations
   2. Reduced purchase price leverage over sellers
   3. Fewer seller concessions

Therefore, if you’re buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales.  It should result in higher home prices, too

Indeed, we’re already seeing it.

Some days, newspaper headlines are a terrible place to get your real estate news. 

Today is one of those days.

After the September New Home Sales report showed sales volume down from August, the mainstream media jumped on the story:

• New Home Sales fall a surprising 3.6%
  
• Surprise Drop In New Home Sales
  
• Stocks slide as New Home Sales fall

But the headlines miss the point, somewhat.  Yes, home sales volume is important to housing, but it’s not as important as home supply.

A deeper look at the New Home Sales data reveals an interesting comparison point:

• New home sales volume fell 3.6%
  
• The number of new homes available for sale fell 3.8%

In other words, sales outpaced supply — a running theme this year and a positive signal for housing.

Since peaking in January 2009, the supply of newly-built homes has now dropped by 40 percent.  The average sale price is up 15% over the same period.

This is why you can’t get your real estate news from the headlines.  You have to dig a little bit deeper to get the real story.

September’s New Home Sales report was plenty strong.  The housing market recovery continues.

Mortgage markets were volatile last week, making it very difficult to shop for mortgage rates.

On most days, lenders issued multiple rate sheets with the trend putting rates higher in the morning, and lower in the afternoon.

Overall, mortgage rates were unchanged on the week. It broke a three-week streak through which mortgage rates rose.

Rates remain roughly one-half percent higher than the lows of early-October.

The biggest positive for rate shoppers last week was tame economic data — specifically concerning the Producer Price Index and the housing sector.

The Producer Price Index is an inflationary, Cost of Living-like measurement for businesses and it went negative in September. Analysts weren’t expecting that and the surprise pulled rates down an eighth.

Similarly, in housing, both the Home Price Index and Housing Starts figures were softer than expectations. These, too, tugged mortgage rates down.

At least temporarily.

We say “temporarily” because — all week long — a steadily-weakening U.S. dollar was leading mortgage rates higher.

All things equal, mortgage rates rise as the dollar loses value and, last week, the dollar touched a 14-month low versus the Euro. The greenback’s weakness countered most of the “positive” news for rate shoppers and is a major reason why rates were so volatile.

The volatility should continue into this week, too. With little data and no Fed speakers, look for mortgage rates to move with the market’s momentum.

Lately, momentum has been pulling rates higher so if you’re floating a rate and trying to time a bottom, the chances are good that we already passed it. Consider locking your rate before rates rise much further.

Once rates break 6 percent, they may not come back down.

The new Good Faith Estimate makes its debut January 1, 2010.

Expanded from 1page to 3, the legislators responsible for the new Good Faith Estimate want it to be simpler for homeowners and home buyers to understand than the former version.

By most accounts, Congress will meet this goal. 

The new Good Faith Estimate includes plain-English explanations of every fee, charge, and interest payment involved in a purchase or refinance.  It also includes a section called “The Shopping Cart” in which applicants can compare lenders.

The new Good Faith Estimate is concise, too.  Using a series of “Yes/No” checkboxes on Page 1, mortgage lenders specifically note:

• The interest rate on the mortgage
  
• Whether the interest rate can change over time
  
• Whether the loan carries a prepayment penalty
  
• The length of the rate lock

Currently, this information is spread across 3 separate forms. 

Furthermore, the new Good Faith Estimate simplifies rate-and-fee comparisons, showing applicants how a lower rate can be available for a higher set of fees, and vice versa.

For all of its clarity, though, the new Good Faith Estimate still fails to address the issue of “suitability”.  As in, is this the right loan for the right borrower?  That’s something only a loan officer can do.

For suitable advice, talk with a loan officer who both listens to your needs and helps you plan for them.  Great terms on an unsuitable loan are often worse than “good” terms on the right one.

Mortgage markets worsened last week on better than expected economic data, causing mortgage rates to rise.

Last week was the third consecutive week that mortgage rates moved higher and, since touching a multi-month low in early-October, conforming mortgage rates are up by about a half-percent. 

It’s likely rates will continue to rise, too.  That’s because the same force that held rates down for so long is now the force pulling them up — expectations for the U.S. economy.

Over the last 6 months, it wasn’t clear in what direction the country was headed.  The housing sector has been gaining in strength, but the rest of the economy has been a question mark.

Last week put an end to some of those questions:

• Retail Sales posted stronger-than-expected results
  
• Consumer Sentiment matched September 2008 levels
  
• Jobless and continuing claims fell below consensus estimates

Expectations for the U.S. economy are changing on the fly.  As a result, stock markets gained last week and mortgage markets lost.

This week, rates could move higher still.  There are an unusually large number of key economic reports including on housing and inflation, plus a handful of speeches from key Federal Reserve members.

With each positive announcement, mortgage rates should rise.

Mortgage rates are higher after the Federal Reserve released the internal notes of its September 22-23, 2009 meeting.

Known as the ”Fed Minutes”, the report details the conversation and cross-currents that led to the Federal Reserve’s decision to vote “unchanged” on the Fed Funds Rate after its last meeting.

The Fed Minutes are the lengthy companion to the more famous, succinct post-meeting press release.

As a comparison:

• Press Release: 383 words
  
• Minutes: 6934 words

The extra level of details is a big deal because Wall Street is perpetually in search of clues about what the Federal Reserve is going to do next.

In the past week, multiple Federal Reserve members hinted that the Fed Funds Rate may rise as early as April 2010.  Fed Chairman Ben Bernanke even alluded to it, too.

The minutes revealed that the economy may improve even faster than was previously expected, too.

These acknowledgements are part of the reason why mortgage rates are up. Because the Fed Funds Rate rises to accommodate a growing economy, the prospect of economic recovery is drawing money into the stock market and away from mortgage-backed bonds.

Less demand for bonds means a lower prices which, in turn, leads to higher rates.

When you own a home with a spouse or partner, the issue of what’s mine, what’s yours, and what’s ours can be a divisive one.

Each household has its own money management methodology and, according to financial talk-show host Suze Orman, most leave significant room for improvement.

In this 4-minute piece aired on NBC’s The Today Show, Orman talks about co-managing finances with topics including:

• How to determine how much money goes into a “personal” spending account versus a “family” spending account
  
• The importance of both parties taking an active role in bill-paying
  
• How to manage the money when one partner doesn’t earn an income

Being aware of money is the first step towards protecting it.