The federal government recently extended and expanded the federal tax credit for home buyers. The tax credit now concludes June 30, 2010 instead of Nov. 30, 2009, and also includes existing homeowners who meet certain qualifications.
MAKING SENSE OF THE STORY FOR CONSUMERS
Current homeowners are eligible for a $6,500 federal tax creditif they have lived in their current home for a consecutive five out of the last eight years, and the adjusted household income does not exceed $125,000 for single filers or $225,000 for joint filers.
The expanded tax credit went into effect Nov. 6, the dayPresident Obama signed the bill. Homes that close escrow between Nov. 6, 2009 and June 30, 2010 are eligible to apply for the tax credit.
The legislation does not require homeowners to sell their current residence; however, the new home must be the primary residence and the price of the home must not exceed the limit of $800,000. Homeowners who plan to retain their current home as a rental or second home are advised to move into the new home the day escrow closes so there is no question it was the principal residence at the time of the tax credit.
Almost all housing types are eligible, including new and existing single-family homes, condominiums, manufactured or mobile homes, and boats that serve as the owner's principal residence. Second homes and investment properties are not eligible.
Home buyers in 2009--those who close after Nov. 6, but no later than Dec. 31, can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Similarly, eligible buyers in 2010 will be able to file for the credit on their 2009 returns or 2010 returns. All home buyers should talk to a tax advisor regarding timing decisions.
Source: LA Times
Saturday, November 28, 2009
One in Four Borrowers Is Underwater
The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.
Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau.
But negative equity "is an outstanding risk hanging over the mortgage market," said Mark Fleming, chief economist of First American Core Logic. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job." Borrowers who owe more than 120% of their home's value, he said, were more likely to default.
Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.
Just months after showing signs of leveling off, the housing market has thrown off conflicting signals in recent weeks. Jittery home builders and bad weather led to a 10.6% drop in new home starts in October, and applications for home-purchase mortgages have dropped sharply in recent weeks.
These same falling prices have boosted home sales from the depressed levels of last year. The National Association of Realtors reported Monday that sales of previously occupied homes in October jumped 10.1% from September to a seasonally adjusted annual rate of 6.1 million, the highest since February 2007.
The bump in sales was ahead of forecasts, spurred by falling prices, low mortgage rates and a federal tax credits for buyers. Congress recently expanded and extended the tax credits.
The latest First American data aren't comparable to previous estimates because the company revised its methodology. First American now accounts for payments made by homeowners that reduce principal, and it no longer assumes that home-equity lines of credit have been completely drawn down.
The changes reduced the total number of borrowers under water -- although both old and new methodology show increases from the previous quarter. Using the old methodology, the portion of underwater borrowers would have increased to 33.8% in the third quarter.
Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.
More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value.
Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home's value.
Andrew Lunsford put 20% down when he bought his home in Las Vegas for $530,000 in 2004. Now, he said, his home was worth less than $300,000.
"I'm to the point where I feel I will never get my head above water," said Mr. Lunsford, a retired state trooper who works for an insurance company. He said his bank won't modify his loan because he can afford his payments, and he's unwilling to walk away, he said: "We're too honest."
Borrowers with negative equity are more likely to default if they live in a state where the bank can't pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond.
But borrowers who are less than 20% under water are likely to maintain their mortgage if their loan is modified and the payments reduced, said Sanjiv Das, head of Citigroup's mortgage unit. "Beyond 120%, the most effective modification is a complete loan restructuring, including a principal reduction."
Mortgage companies have been reluctant to reduce mortgage principal over worries about "moral contagion, with people not paying their mortgage or redefaulting because they believed the bank would reduce their principal," Mr. Das said.
Many borrowers are so deeply under water that they can't take advantage of lower rates and refinance their mortgage. "We're declining hundreds of loans each month," said Steve Walsh, a mortgage broker in Scottsdale, Ariz. "The only way we will make headway is if we allow for a streamlined refinance where the appraisal is irrelevant."
Realtors reported that home sales in October were up 24% from a year earlier. The number of homes listed for sale nationwide was 3.57 million at the end of October, down 3.7% from a month earlier, the trade group said. But that inventory could rebound next year as banks acquire more homes through foreclosure.
About 7.5 million households were 30 days or more behind on their mortgage payments or in foreclosure at the end of September, according to the Mortgage Bankers Association. Many of those homes will be lost to foreclosure, adding to the supply of homes for sale.
A recovery could pay off for the roughly 30% of underwater borrowers who owe 110% or less of their home's value and are able to endure the slump. "Most people prefer to stay in their home" even if the value of their property has declined, said John Burns, a real-estate consultant based in Irvine, Calif.
Source: Wall Street Journal
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.
Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau.
But negative equity "is an outstanding risk hanging over the mortgage market," said Mark Fleming, chief economist of First American Core Logic. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job." Borrowers who owe more than 120% of their home's value, he said, were more likely to default.
Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.
Just months after showing signs of leveling off, the housing market has thrown off conflicting signals in recent weeks. Jittery home builders and bad weather led to a 10.6% drop in new home starts in October, and applications for home-purchase mortgages have dropped sharply in recent weeks.
These same falling prices have boosted home sales from the depressed levels of last year. The National Association of Realtors reported Monday that sales of previously occupied homes in October jumped 10.1% from September to a seasonally adjusted annual rate of 6.1 million, the highest since February 2007.
The bump in sales was ahead of forecasts, spurred by falling prices, low mortgage rates and a federal tax credits for buyers. Congress recently expanded and extended the tax credits.
The latest First American data aren't comparable to previous estimates because the company revised its methodology. First American now accounts for payments made by homeowners that reduce principal, and it no longer assumes that home-equity lines of credit have been completely drawn down.
The changes reduced the total number of borrowers under water -- although both old and new methodology show increases from the previous quarter. Using the old methodology, the portion of underwater borrowers would have increased to 33.8% in the third quarter.
Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.
More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value.
Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home's value.
Andrew Lunsford put 20% down when he bought his home in Las Vegas for $530,000 in 2004. Now, he said, his home was worth less than $300,000.
"I'm to the point where I feel I will never get my head above water," said Mr. Lunsford, a retired state trooper who works for an insurance company. He said his bank won't modify his loan because he can afford his payments, and he's unwilling to walk away, he said: "We're too honest."
Borrowers with negative equity are more likely to default if they live in a state where the bank can't pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond.
But borrowers who are less than 20% under water are likely to maintain their mortgage if their loan is modified and the payments reduced, said Sanjiv Das, head of Citigroup's mortgage unit. "Beyond 120%, the most effective modification is a complete loan restructuring, including a principal reduction."
Mortgage companies have been reluctant to reduce mortgage principal over worries about "moral contagion, with people not paying their mortgage or redefaulting because they believed the bank would reduce their principal," Mr. Das said.
Many borrowers are so deeply under water that they can't take advantage of lower rates and refinance their mortgage. "We're declining hundreds of loans each month," said Steve Walsh, a mortgage broker in Scottsdale, Ariz. "The only way we will make headway is if we allow for a streamlined refinance where the appraisal is irrelevant."
Realtors reported that home sales in October were up 24% from a year earlier. The number of homes listed for sale nationwide was 3.57 million at the end of October, down 3.7% from a month earlier, the trade group said. But that inventory could rebound next year as banks acquire more homes through foreclosure.
About 7.5 million households were 30 days or more behind on their mortgage payments or in foreclosure at the end of September, according to the Mortgage Bankers Association. Many of those homes will be lost to foreclosure, adding to the supply of homes for sale.
A recovery could pay off for the roughly 30% of underwater borrowers who owe 110% or less of their home's value and are able to endure the slump. "Most people prefer to stay in their home" even if the value of their property has declined, said John Burns, a real-estate consultant based in Irvine, Calif.
Source: Wall Street Journal
First-Time Homebuyers Leading Market Back
Propelled by the first-time homebuyers tax credit, nearly half of home sales are now being made by first-time purchasers, according to an industry report.
In fact, 47% of all Americans who purchased homes this year had not owned one during the previous three years, according to a press release Friday from the National Association of Realtors (NAR). That was up from 41% of sales in 2008 and 36% in 2006.
The tax credit boosted markets by giving first-time buyers a credit of up to $8,000 they could deduct from their income taxes. The credit is fully refundable: Even a buyer who pays less than $8,000 in income tax gets the full amount of the credit back.
The credit was recently extended through the middle of 2010 and expanded to include many existing homeowners. That has the industry buzzing.
"The credit is working better than first projected -- it now looks like we'll have 2.3 to 2.4 million first-time buyers this year," said Lawrence Yun, chief economist for NAR. "With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3% and 5% in 2010."
NAR forecasts that existing-home sales will total slightly over 5 million in 2009, a 2% increase compared with 2008. Next year, they predict a gain of 13.6% to 5.69 million units. That should draw down inventory and prop up home prices, according to Yun, but, he cautioned: "Risks, such as unemployment, remain."
Critics of the tax credit call it a poorly targeted method of boosting sales. The credit added, by nearly the most positive evaluations -- including NAR's -- fewer than 400,000 sales to the total this year, about 20% of all first-time purchases.
Since all first-timers get the credit, whether it persuaded them to buy or not, that would mean about $40,000 was spent by the government for every extra sale, critics say.
Indeed, many in the industry trace the improvement in the housing market to much better affordability, rather than the tax credit.
Not only have home prices fallen more than 30% from their peak, according to the S&P/Case-Shiller Home Price Index, but mortgage rates have remained extremely low all year, keeping monthly payments low.
Most sales have been of existing homes. New home sales, as well as new home construction, have remained mired in the doldrums.
NAR predicts total new home sales will total a mere 397,000 this year, rising to 549,000 in 2010. During the housing boom, new home sales were far higher, more than 1.35 million in 2005, for example.
While new home sales are still very low, the inventory of new homes for sale has been dropping. That's because very few new homes are being built. Existing home inventory has also fallen a bit.
"We've seen a steady downtrend in housing inventory for well over a year," said Yun.
Any home price rise will also have a healthy impact on the foreclosure plague. Falling prices are a major contributing factor driving foreclosures. As home values fall, homeowners are less able and less likely to continue to make monthly payments.
Mortgage borrowers often fall behind because there's no home equity cushion to tap should they run into unexpected expenses.
Too, when home values really plummet and owners fall way underwater, owing far more than their home is worth, it sometimes makes good financial sense to give up trying to pay for the home.
Under those conditions, some homeowners simply walk away.
Source: CNN
In fact, 47% of all Americans who purchased homes this year had not owned one during the previous three years, according to a press release Friday from the National Association of Realtors (NAR). That was up from 41% of sales in 2008 and 36% in 2006.
The tax credit boosted markets by giving first-time buyers a credit of up to $8,000 they could deduct from their income taxes. The credit is fully refundable: Even a buyer who pays less than $8,000 in income tax gets the full amount of the credit back.
The credit was recently extended through the middle of 2010 and expanded to include many existing homeowners. That has the industry buzzing.
"The credit is working better than first projected -- it now looks like we'll have 2.3 to 2.4 million first-time buyers this year," said Lawrence Yun, chief economist for NAR. "With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3% and 5% in 2010."
NAR forecasts that existing-home sales will total slightly over 5 million in 2009, a 2% increase compared with 2008. Next year, they predict a gain of 13.6% to 5.69 million units. That should draw down inventory and prop up home prices, according to Yun, but, he cautioned: "Risks, such as unemployment, remain."
Critics of the tax credit call it a poorly targeted method of boosting sales. The credit added, by nearly the most positive evaluations -- including NAR's -- fewer than 400,000 sales to the total this year, about 20% of all first-time purchases.
Since all first-timers get the credit, whether it persuaded them to buy or not, that would mean about $40,000 was spent by the government for every extra sale, critics say.
Indeed, many in the industry trace the improvement in the housing market to much better affordability, rather than the tax credit.
Not only have home prices fallen more than 30% from their peak, according to the S&P/Case-Shiller Home Price Index, but mortgage rates have remained extremely low all year, keeping monthly payments low.
Most sales have been of existing homes. New home sales, as well as new home construction, have remained mired in the doldrums.
NAR predicts total new home sales will total a mere 397,000 this year, rising to 549,000 in 2010. During the housing boom, new home sales were far higher, more than 1.35 million in 2005, for example.
While new home sales are still very low, the inventory of new homes for sale has been dropping. That's because very few new homes are being built. Existing home inventory has also fallen a bit.
"We've seen a steady downtrend in housing inventory for well over a year," said Yun.
Any home price rise will also have a healthy impact on the foreclosure plague. Falling prices are a major contributing factor driving foreclosures. As home values fall, homeowners are less able and less likely to continue to make monthly payments.
Mortgage borrowers often fall behind because there's no home equity cushion to tap should they run into unexpected expenses.
Too, when home values really plummet and owners fall way underwater, owing far more than their home is worth, it sometimes makes good financial sense to give up trying to pay for the home.
Under those conditions, some homeowners simply walk away.
Source: CNN
2.8% Drop In lending Is Largest Since 1984
Lending by U.S. banks plunged by 2.8 percent in the third quarter, the largest drop since at least 1984 and the fifth consecutive quarter in which banks have reduced lending, the Federal Deposit Insurance Corp. reported Tuesday.
The decline in lending is emerging as a serious impediment to economic recovery. Banks reduced the amount of money extended to their customers by $210.4 billion between July and September, cutting back in almost every category, from mortgage lending to funding for corporations.
Large banks, the beneficiaries of billions of dollars in federal aid intended to spur new lending, were responsible for a disproportionate share of the decline, the FDIC said. "We need to see banks making more loans to their business customers," FDIC Chairman Sheila C. Bair said Tuesday.
Bair renewed her call for the government to spur lending by helping banks sell troubled loans, freeing up money for new lending. The Obama administration has considered several versions of such a program but so far has resisted calls to proceed.
The FDIC reported the lending data as part of a quarterly review of the health of the banking industry. Banks posted an aggregate profit of $2.8 billion in the third quarter, swinging back from a loss of $4.3 billion in the second quarter, the FDIC said.
About a quarter of banks continued to lose money, however, and regulators closed 50 banks during the third quarter.
The cost of cleaning up failed banks has depleted the FDIC's insurance fund, which repays depositors in those banks. The FDIC said the fund had a negative balance of $8.2 billion at the end of September. The agency plans to collect $45 billion from the banking industry at the end of the year, an amount it projects will cover the cost of failures over the next several years.
The level of the insurance fund does not affect the safety of insured deposits, as the FDIC is ultimately backed by the Treasury.
The FDIC said that just three new banks were created during the third quarter, the smallest number since World War II.
Source: Washington Post
The decline in lending is emerging as a serious impediment to economic recovery. Banks reduced the amount of money extended to their customers by $210.4 billion between July and September, cutting back in almost every category, from mortgage lending to funding for corporations.
Large banks, the beneficiaries of billions of dollars in federal aid intended to spur new lending, were responsible for a disproportionate share of the decline, the FDIC said. "We need to see banks making more loans to their business customers," FDIC Chairman Sheila C. Bair said Tuesday.
Bair renewed her call for the government to spur lending by helping banks sell troubled loans, freeing up money for new lending. The Obama administration has considered several versions of such a program but so far has resisted calls to proceed.
The FDIC reported the lending data as part of a quarterly review of the health of the banking industry. Banks posted an aggregate profit of $2.8 billion in the third quarter, swinging back from a loss of $4.3 billion in the second quarter, the FDIC said.
About a quarter of banks continued to lose money, however, and regulators closed 50 banks during the third quarter.
The cost of cleaning up failed banks has depleted the FDIC's insurance fund, which repays depositors in those banks. The FDIC said the fund had a negative balance of $8.2 billion at the end of September. The agency plans to collect $45 billion from the banking industry at the end of the year, an amount it projects will cover the cost of failures over the next several years.
The level of the insurance fund does not affect the safety of insured deposits, as the FDIC is ultimately backed by the Treasury.
The FDIC said that just three new banks were created during the third quarter, the smallest number since World War II.
Source: Washington Post
30-Year Rates Match All Time Low This Week
Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.78 percent with an average 0.7 point for the week ending November 25, 2009, down from last week when it averaged 4.83 percent. Last year at this time, the 30-year FRM averaged 5.97 percent. The 30-year has not been this low since the week ending April 30, 2009, when it averaged 4.78 percent.
The 15-year FRM this week averaged 4.29 percent with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.18 percent this week, with an average 0.6 point, down from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.
The 1-year Treasury-indexed ARM averaged 4.35 percent this week with an average 0.7 point, unchanged from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent. The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
"Long-term mortgage rates eased for the fourth consecutive week to record levels," said Frank Nothaft, Freddie Mac vice president and chief economist." Interest rates for 30-year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year's peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage.
"House prices are slowly beginning to firm now. For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller® 20-city house price indexes.
Source: Freddie Mac
The 15-year FRM this week averaged 4.29 percent with an average 0.6 point, down from last week when it averaged 4.32 percent. A year ago at this time, the 15-year FRM averaged 5.74 percent. The 15-year FRM has never been this low since Freddie Mac started tracking it in 1991.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.18 percent this week, with an average 0.6 point, down from last week when it averaged 4.25 percent. A year ago, the 5-year ARM averaged 5.86 percent. The 5-year ARM has never been this low since Freddie Mac started tracking it in 2005.
The 1-year Treasury-indexed ARM averaged 4.35 percent this week with an average 0.7 point, unchanged from last week when it averaged 4.35 percent. At this time last year, the 1-year ARM averaged 5.18 percent. The 1-year ARM has not been this low since the week ending July 7, 2005, when it averaged 4.33 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
"Long-term mortgage rates eased for the fourth consecutive week to record levels," said Frank Nothaft, Freddie Mac vice president and chief economist." Interest rates for 30-year fixed mortgage loans tied an all-time record low while both 15-year fixed mortgages and 5-year ARMs broke their corresponding records. Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year's peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage.
"House prices are slowly beginning to firm now. For instance, annual house price declines slowed for the sixth consecutive month in September, down only 3 percent, and represented the smallest decline since February 2008, according the Federal Housing Finance Agency's purchase-only house price index. Moreover, 11 of the 20 major metropolitan areas experienced monthly house price increases between August and September, based on the S&P/Case-Shiller® 20-city house price indexes.
Source: Freddie Mac
Friday, November 20, 2009
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.
Source: CNN
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.
Source: CNN
Talking Points
Homeowners can reduce their energy bills by lowering the thermostat setting on their water heater. Most manufacturers set water heater thermostats at 140 degrees Fahrenheit, but most households don't need water hotter than 120 degrees. Households with water heaters older than 12 years should consider replacingit with a new unit. This year and next, the federal governmentis offering a tax credit of 30 percent of the cost of qualifiedwater heaters, up to $1,500.
Affordability in California during the third quarter of 2009 stood at 64 percent, meaning 64 percent of the state'shouseholds could afford to purchase an entry-level home inCalifornia, according to the CALIFORNIA ASSOCIATION OF REALTORS First-time Buyer Housing Affordability Index.The median price of an entry-level home in California was $247,150 in the third quarter of 2009, making the estimated monthly payment including taxes and insurance $1,450, accordingto C.A.R.'s affordability index.
The minimum household income needed to purchase an entry-level home in California in the third quarter of 2009 was $43,500. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price.
Source: California Association of Realtors
Affordability in California during the third quarter of 2009 stood at 64 percent, meaning 64 percent of the state'shouseholds could afford to purchase an entry-level home inCalifornia, according to the CALIFORNIA ASSOCIATION OF REALTORS First-time Buyer Housing Affordability Index.The median price of an entry-level home in California was $247,150 in the third quarter of 2009, making the estimated monthly payment including taxes and insurance $1,450, accordingto C.A.R.'s affordability index.
The minimum household income needed to purchase an entry-level home in California in the third quarter of 2009 was $43,500. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price.
Source: California Association of Realtors
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