Reno and Sparks Real Estate Today

Home Buyer Tax Credit - Extended and Expanded

2009-11-09T15:32:40-08:00

Late last week, the U.S. Senate unanimously passed an extension and expansion of the homebuyer tax credit. The House of Representatives approved the agreement reached in the Senate by a vote of 403-12.

You can check out more details here – Home Buyer Tax Credit

Below is a summary of the new modifications in the extension and expa nsion of the tax credit:

1) The $8,000 tax credit will be extended and available for first-time purchases before May 1, 2010.

2) A new $6,500 tax credit will be available for repeat buyers who purchase between December 1, 2009, and May 1, 2010. To qualify for this provision, buyers must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years.

3) Prospective purchasers with binding contracts in place as of April 30, 2010, will be allowed an additional 60 days to complete the transaction.

4) Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.

If you know anyone looking to buy their first home at a time when prices and interest rates are still down, or if you are thinking of buying another home and getting the new $6,500 credit please contact me today.

Here is another great article- 4 tips for the homebuyer tax credit.

Home Buyer Tax Credit Extended

2009-11-06T11:08:20-08:00

Congress just passed an expanded version of the $8,000 first time home buyer tax credit that was set to expire on November 30. The new version of the tax credit has the potential to stimulate the housing more substantially that the previous initiative. Although the tax credit remains at $8,000 for home buyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for home buyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up home buyers did not qualify. Consider these three examples:

Example 1:

Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:

Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:

Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight. The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. If you sign a binding contract to purchase a home before May 1st

, you would need to close on the transaction before July 1, 2010. It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit. The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. This means that more people will qualify for the credit – especially in parts of the country with higher costs of living. This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:

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The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others

• If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit.)

•

The credit applies even if you have co-signers on your mortgage loan

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Short Sales 101 -- What is a Short Sale?

2009-10-21T16:27:54-07:00

If you live in the Reno Sparks area and have had some contact with real estate sales, you have probably heard the term SHORT SALE. So what does a short sale actually mean? The simple definition is your mortgage balance is greater than the current value of your home. For example, if you bought your home for $250,000 a few years back and got a mortgage for say $230,000. For some reason you now have to sell your home. Unfortunately, if you sell your home today it will only sell for $150,000. This means the proceeds (selling price) will be “short” $80,000.

Here is an entry from wikipedia. A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.^[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

So why would a bank be willing to take less than the home is worth? First of all, to even be considered for a short sale, you would have to have a signification “financial hardship.” Loss of a job, escalating mortgage payments, pay cuts, etc.. So the way the bank looks at it is if you are going to quit making payments on your home, we are going to have to foreclose on the house. The foreclosure process is lengthy and costly for a mortgage company. In addition, after the foreclosure the house will sit vacant and may get vandalized, the lawn will dye, and a stigma will be attached the property. In the end the foreclosure cost more and the property will end selling for less, not to mention the negative impact on the neighborhood. This is a loose-loose scenario for the bank/mortgage company.

With a short sale, the costs are much less, the property remains occupied, maintenance is kept up, and the property will normally sell for a higher price. The bank/mortgage companies will still loose money, but on a short sale the loss will be reduced.

Short sales are usually much better for the homeowner as well. The impact on credit is much less, you are able to stay in the house until it sells, and the neighborhood is saved from foreclosure.

If you are experiencing a financial hardship and are having trouble making your payments, a short sale might be a good option. As always, you should seek guidance from real estate professionals, attorney, and your CPA before you make a decision.

Call or email me if you would like me to take a look at your situation.

Ryan

Reno / Sparks Real Estate Market Stats For August

2009-09-29T11:44:30-07:00

It seems I get the question daily, “how’s the Reno Sparks market doing?” Many believe the market is poised for a recovery others feel we will see a flat line for a couple years. I still have to wait and see. While there are many positive signs, we still have work to do. The market in Reno and around the country is being propped up my government “help.” Interest rates are being kept artificially low via government intervention and the $8000 home buyer tax credit, to name a few. The Fed outlined their plan to “slowly” scale back their infusion of “support.” Once the Fed infusions are gone, interest rates will go up. The $8000 tax credit is due to expire December 1. Many groups are lobbying for the credit to be extending for at least 6 months. The opposition to the extension claims the vast majority of buyers would have purchased a home regardless of the tax credit. I have to agree. So the question is, what impact have these programs had on the market? No doubt lower interest rates have had a positive impact. My opinion is the sooner the gov. gets out of the housing stimulation business, the better for all of us in the long run. The biggest factor in the market returning to a more “normal” state is simple, affordability. Lower home price coupled with record low interest rates have stabilized many markets, Reno Sparks included. This has brought home affordability rates to their best levels in decades.

Let’s take a look at some numbers.

Below is a chart outlining the number of sales by price since Oct. 08. As you can see, the majority of activity is in the $250k or less price range.

This chart show median home price trends for the Reno Sparks area. As you can see the median price has held steady the last few months at around $180k. What’s interesting to note is median prices are well below market trend lines.

The next chart is median price compare to number of sales. As you can see sales are up and prices are down. Sales are up 51% year over year and median price is down 28% year over year.

So what does all this mean?

On the upside, prices have stabilized, affordability is great, sales are up, and supply has normalized.

On the downside, there are still a large number of “distressed” homed that need to be purged from the market. Prices are down for the year, and unemployment remains high.

I believe we are going to see a stable market, in terms of price and sales numbers, over the next 1-3 years. The coming rise in interest rates will most likely slow down price appreciation. As the economy slowly recovers and unemployment numbers drop, we will see prices start to creep up.

Does size matter? Apparently not as much as is used to.

2009-08-14T00:19:00-07:00

Th e trend is smaller and more efficient. Cars, trucks, computers, cell phones, and now it appears real estate has joined the party.

New homes are shrinking for the first time in 15 years. According to the Census Bureau the average new home is 2,065 sq. ft., a 7% decline from a year ago.

The question is, is this a function of changing consumer interests or a result of the downturn in the economy? I would say it is a little of both.

From a real estate perspective, builders have to adjust to the market and what is selling. Right now smaller entry level and investor friendly properties are selling. Tax credits and low interest rates have boosted this segment of the market. On the flip side, higher end home sales are really struggling. “Jumbo” loans for higher end homes are more expensive and harder to get. The higher the prices get, the fewer people will be able to afford them.

From the consumer perspective, people are adjusting to the new realties of our economy. Let’s face it, gas prices are going back up. Most of the newer developments in town are in suburban areas. Spanish Springs, Cold Springs, Stead, Golden Valley, Somerset, Damonte Ranch, and south suburban areas. It becomes a trade off. Do I want to have a bigger house and drive further, or do I want a smaller house with less driving? 6-8 years ago this wasn’t even a consideration for most people. Gas was cheap and commutes were fast and easy. This is not the case anymore. Property taxes are on the rise, as well as energy cost to heat and cool your home. Bigger house equals more taxes, higher utility cost, higher maintenance costs, etc. Not to mention extra cleaning! Who wants that?

So will this trend continue? I say yes. People don’t want to be “married” to their house. They are cutting back on living expenses to free up cash for other things. Eating out, sporting events, college funds, and vacations.

What do you think?

Housing Prices Will Go Up it is Not if but When

2009-08-12T12:12:37-07:00

There are two major reasons why house prices are poised to go up over the next few years.

#1 - Increase in Population = Increase in Demand
The population of the United States has grown by an average of 1.27% every single year since 1900. At current population levels, this means that we are adding about 3 million people to our population every year. As our population grows, we have about 1.3 - 1.5 million new households that are formed each year. These can include people who graduate from college and enter the work force, and adults who are currently living with their parents that decide to move out on their own.

Over the last 30 years, the average growth in new households has been about 1.4 million each year. Of course, these people will need a place to live. In fact, the National Association of Realtors estimates that up to 40% of all home buyers in today's market are purchasing their first home - a perfect indication that this segment of the marketplace will continue to thrive even in the midst of an economic downturn.

The growth in population isn't the only thing that will increase demand for new housing. In fact, approximately 300,000 housing units are demolished each year. This is primarily due to functional obsolescence because buildings become old and outdated. This means that the demand for new housing is about 1.7 million new units each year in order to replace the demolished homes and house the new households that are formed. Okay; so now that we understand the demand for housing, what does the supply look like?

#2 - Less Building = Decrease in Supply
It's no secret that home builders are struggling in this economy. In fact, the number of new housing units being built went from a peak of 2.1 million in 2005 to less than one million in 2008. New housing starts for 2009 are also scheduled to come in below one million as the market continues to work off the excess supply of housing that was built during the last few years. In fact, here's an interesting breakdown of new housing starts since the year 2000:

2000 = 1.6 million new units
2001 = 1.7 million new units
2002 = 1.7 million new units
2003 = 1.9 million new units
2004 = 2.0 million new units
2005 = 2.1 million new units
2006 = 1.8 million new units
2007 = 1.3 million new units
2008 = less than one million new units
2009 forecast = less than one million units

As you can see, from 2000 - 2002, the supply of new housing units each year was just about right in order to meet the demand of 1.7 million as outlined above. However, things started to get a bit out of whack with some oversupply in the market between 2003 and 2006. Home values went into decline from 2007 - 2009 as the market started working through this over-supply.

However, sometime during the next 12-24 months, the oversupply of housing units will be completely absorbed due to the demand issues that we outlined above. In fact, if the trend continues, there could even be a housing shortage at some point in the next two years unless home builders start building new units at a much quicker pace! Do the math yourself:

Annual Demand for New Housing Units: approximately 1.7 million new units

Annual Supply of New Housing Units: less than one million

Bottom Line: Demand will become greater than the supply at some point in the near future, and house prices will go up.

Remember, there is no "national housing market" as all real estate markets are local. Therefore, a state like Michigan that is losing population may take longer to see house prices recover and go up; while a state that is gaining population, like Texas, may see house prices go up much sooner. In all cases, talk to your mortgage, financial, and real estate professionals for more details regarding your specific marketplace.

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Finding Foreclosure Deals in the Reno Sparks Area

2009-08-05T13:00:00-07:00

If you are looking for “deals” on homes in the Reno Sparks area, foreclosures and short sales can be a great option. You can sign up for a free customized list of foreclosures in the Reno Sparks area here foreclosure deals list. In addition to this list, you can also search directly on the top banks websites for bank owned properties. Below is a list with web addresses.

As always, if you have any questions about any of properties you find, we would be happy to assist you! Happy hunting.

AHMSI
http://www.ahmhomes.com

Bank of America
http://bankofamerica.reo.com/search/propertysearch.aspx

BB&T
http://www.bbt.com/applications/specialassets/search.asp

Chase
http://mortgage.chase.com/pages/other/co_properties_landing.jsp

Citi
http://www.citimortgage.com/Mortgage/Oreo/SearchListing.do

Compass Bank
https://www.compassbank.com/appforms/properties/index.jsp

Countrywide (Now Bank of America owned)
http://www.countrywide.com/purchase/f_reo.asp

GMAC - Now CapMark
http://www.capmark.com/CAPMARK/mainpage.aspx?id=180&ts1_TSMenuTargetID=180&ts1_TSMenuTargetType=1&ts1_TSMenuID=0

HomePath by Fannie Mae
http://www.homepath.com/

HomeSteps by Freddie Mac
http://www.homesteps.com/hm01_1featuresearch.htm

HSBC
http://www.banking.us.hsbc.com/HICServlet?cmd_PropertySearchDefault=cmd_PropertySearchDefault

HUD - Housing and Urban Development Listings
http://www.hud.gov/homes/index.cfm

IndyMac
http://apps.indymacbank.com/individuals/realestate/Search.asp

M&T
http://services.mandtbank.com/personal/bank_owned_prop.cfm
Ocwen
www.ocwen.com/

Regions Bank
http://realestate.regions.com/servlet/Ore/ForeclosedPropertySearch.jsp

SunTrust
http://suntrust.res.net/

Wachovia
http://reo.wachovia.com/

Washington

Mutual
http://www.wamuproperties.com/

Loan modification program offered to just 15% of eligible borrowers

2009-08-04T11:24:58-07:00

According to the monthly progress report on the performance of the loan modification program introduced by the Obama administration, only 15% of the borrowers eligible to participate in the program have been offered loan modification. Among the 38 firms that are participating in the program, several loan servicing companies including American Home Mortgage Servicing and PNC Financial Services Group Inc. have not modified a single loan. The best performer among large firms is Saxon Mortgage Services Inc., which has implemented trial loan modifications to 25% of its eligible borrowers. Mortgage firms have been criticized for not doing enough to expedite the program.

The government's initial target was to assist up to 4 million distressed homeowners. However, just about 200,000 homeowners have received loan modifications so far. According to RealtyTrac, 1.5 million households have received at least 1 foreclosure notice in the first 6 months of this year. "We want to go faster," said Michael Barr, the Treasury Department's assistant secretary for financial institutions. "There are a bunch of servicers that are lacking in performance. They have to lift their game." Some analysts say that modification procedures take time given the complexity involved. "A lot of these modifications are very hard to do, it takes time and you can't rush it," said Paul Miller, a bank analyst for FBR Capital Markets.

These numbers aren’t really surprising. Think about it, banks and financial institutions aren’t exactly excited about going to home owners and reducing interest rates and loan amounts. In addition, many of these loans are owned by investors who need to be consulted. Most banks won’t even talk to you unless you are behind on your payments at least 30-60 days. Many homeowners have tried to call in advance and can’t get anywhere, most banks and mortgage companies won’t even talk to you. Seems a little bit counter productive. If you have a homeowner that is concerned about making payments and calls ahead of time, wouldn’t you think it would be a good idea to try and work something out before it gets bad, before the homeowner looses hope? Some have said banks want your credit to get trashed before they will work you. I don’t think that’s the case. I just think banks are still overwhelmed with defaults they have deal with. They are dealing with the flames/fire and not the smoke. Loan modifications make a lot of sense for all parties involved. Efforts need to be improved on both sides. If you are having trouble making your mortgage payments, there are options. Contact me, or another real estate professional, to find out what your options are. You will almost always be better off than waiting until it is too late.

Feds push mortage companies for faster modifications

2009-07-29T10:53:22-07:00

In a meeting held yesterday, the feds pushed to get “pledges” from 25 mortgage companies to streamline their loan modification process. The goal is to get 500,000 loan modifications done by Nov. 1^st. A lofty goal considering there are only 200,000 modifications currently in process, and Nov. 1^st is right around the corner.

While this sounds good, 500,000 loan modifications is a drop in the bucket. Past attempts at loan modifications have proven to be mostly failures. The majority of loan modifications end up in default within 6 months after modification. Most loan companies modify the payments on loans by extending the term and lowering interest rates. While this provides short term “relief”, to me the bigger issue is the loan amount. The reality is people do not want to fight to pay payments on a house that is 30-40-50-60,000 or more upside down. If loan companies do more to reduce loan amounts, I believe the long term success would increase significantly.

Full story below.

The Obama administration wishes to see at least 500,000 loan modifications by November 1 of this year; currently about 200,000 loan modifications are in process. Administration officials held discussions this week with 25 loan servicers participating in the modification program and asked them to do expedite the program. Borrowers have been complaining about administrative delays in processing their loan modification application. "[T]oo many homeowners are at risk of foreclosure right now," Treasury Secretary Tim Geithner said in a statement after the meeting. "Today's meeting was an opportunity to identify ways to accelerate the program and bring relief faster." President Obama has acknowledged that the modification program, which was announced in February this year, has so far not been effective. "Our mortgage program has actually helped to modify mortgages for a lot of our people, but it hasn't been keeping pace with all the foreclosures that are taking place," Obama said l
ast month.

Servicers who participated in the meeting made a number of suggestions on streamlining the paperwork and creating a website to enable borrowers to make applications online. Sanjiv Das, chief executive of CitiMortgage, said: "Today's meeting was an important step toward the administration's and our shared objective of improving the effectiveness and efficiency of the Make Home Affordable mortgage modification program."
Mortgage-backed bonds worth $3 billion in TALF pipeline
The Obama administration introduced the Term Asset-Backed Securities Loan Facility (TALF) last March in order to revive asset-backed securities market. The next TALF window which will open in September this year is likely to see deals worth $3 billion involving Commercial Mortgage Backed Securities (CMBS). More than a dozen real estate investment trusts are expected to participate. The Federal Reserve is likely to lend CMBS buyers up to 85% of the purchase price for TALF securities.

"If the first deals are successful, we think we can get $10 to $25 billion done in the next six months," said Kenneth Rosen, who manages a hedge fund. The program accepts securities that have the highest rating, and borrowings under the program must be repaid within 5 years. Analysts are divided on the extent to which the program will revive the CMBS market which collapsed in 2008 due to credit crisis. David Twardock, president of Prudential Mortgage Capital, said TALF will help revive the CMBS market "in a very modest way." TALF is set to expire by the end of 2009 and some analysts are seeking an extension of the program.

Harvard University 2009 housing study.

2009-07-06T16:06:36-07:00

The Joint Center for Housing Studies of Harvard University (that's a mouthful) has released their “State of the nations housing 2009” report.

Download Housing report 2009

If you are into stats and trends it is an interesting read.

Contained in the report:

- Stats on the downturn in building.

- Housing effects on GDP

- Affordability index numbers

- The baby boomer effect.

- House price depreciation stats

- Cash out refinance stats

- Income studies

- Home equity or stocks more important to wealth?

- Rental housing

- And much more.

Most information is national. But the Reno Sparks Washoe county real estate market is referenced.