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The Real Estate Report March 27, 2013

Another Small Step For Man Becomes....

A giant leap for mankind? Okay, perhaps we are exaggerating here. However, we do feel that a very small step taken could become very big news in the long run. For years, consumers, professionals and analysts have been complaining that tight lending standards have been holding up the economic recovery. The reasons for these tight standards were obvious. During the "sub-prime" boom of a decade ago, credit standards became so loose that a real estate bubble formed. We all know what happened from there. The bubble burst and lenders swung the pendulum severely to the conservative side. What you may not have realized is that the Federal Reserve Board's policy of moving interest rates to historic lows to combat the slump has actually prolonged the conservative underwriting trend. How?
Lenders have been inundated with refinances for some time now. If business is that good, why invite more business in the door by loosening credit standards? Well, now that the real estate recovery is underway and rates are moving up a bit, we get news that banks are indeed loosening credit standards ever so slightly. We think this is one other step that will help make the recovery even stronger. In this case, higher rates are actually good news. There is a lot of latent demand out there and if this demand increases, so will job creation and this will create more demand for real estate and consumer goods. Five years ago, we were in a vicious cycle. Slightly looser credit could help us move to a full virtuous cycle. Don't expect the subprime days to come back, but every little bit helps. And if you read that rates have increased, you may realize that this could be the last opportunity to take advantage of the Fed's sale on money -- whether you are looking to purchase a home, refinance or even purchase an automobile. Don't step, leap at the opportunity.

 

 A very tight mortgage lending environment “promises improvements this year as the drivers of tough credit standards reverse,” according to Moody’s Analytics ResiLandscape Report. Still, lending will remain tight by historical standards, the report notes. Tight underwriting conditions have been one of the main obstacles for the housing market recovery. But the credit agency says that those conditions began to ease somewhat this year and likely will continue to. "Rising house prices give lenders more breathing room to extend credit," the analysts at Moody’s noted. Over the past year and a half, large lenders have loosened up or held standards stable on prime loans for originations, according to the Survey of Senior Lending Officers. Aiding lenders’ confidence is that mortgage delinquencies have fallen to pre-recession rates. "Being right-side up on the mortgage improves a borrower’s credit profile. It also lowers the risk of default and increases the likelihood of trade-up buying," according to the Moody’s report. Residential loan supply will remain constrained, but “improved consumer credit quality combined with steady growth in jobs, low interest rates and modestly rising house prices makes it clear that more households will be able to qualify for a home loan," Moody's said. "Greater credit availability will in turn help drive stronger home sales and stronger price appreciation and help keep the housing market and the larger economy on an upward path." Source: HousingWire

Homes are selling faster as buyer demand picks up; leaving a very low supply of homes left for sale, according to the latest February MLS data figures from Realtor.com. Homes in February sold faster than in any February since 2007, according to the site. In February, homes were on the market for a median of 98 days—that’s down from 123 days in February 2011. In some markets, homes are spending even less than a month listed for sale, most notably in places like California. For example, in Oakland, Calif., homes spent a median number of 14 days on the market in February before they were either sold or removed from the market for other reasons, according to the Realtor.com data. Sacramento’s median number of days on the market was 21. A total of eight metros in the top 10 for fastest selling times were in California, with only Denver (median 28 days) and Seattle (median 33 days) rounding out the list. The median number of days on the market was also less than two months in places such as Phoenix, Washington, D.C., Detroit, Minneapolis, Atlanta, Dallas, Orlando and Fort Lauderdale. With home sales picking up pace, buyers and sellers are less likely to see price reductions on homes and to see more multiple offer situations, Curt Beardsley, vice president with Move, which operates Realtor.com told USA Today. Source: USA Today
Recent home buyers who want a walk-in closet but didn’t get one in their home say they’re willing to spend $1,350 for one. That’s just one of the important findings in the 2013 Profile of Buyers’ Home Feature Preferences, released by the National Association of Realtors®. Buyers who wanted new kitchen appliances but didn’t get them say they’re willing to spend $1,840 for them. Those who wanted air conditioning are willing to spend $2,520. The report looks at 33 home feature preferences based on what a representative sample of U.S. households that bought between 2010 and 2012 say they value. Just over 2,000 households participated. Among the findings: Households in the South tend to want the biggest and newest homes, and they like wooded lots. Those in the Northeast are most likely to like hardwood floors. First-time buyers and single women are big buyers of older homes. Households with children and move-up buyers like larger homes. The report also contains these tidbits on buyer preferences:

• Among buyers 55 and older, 42 percent want a single-level home, compared to just 11 percent of buyers under age 35. Single women also tend to place importance on single-level homes.
• Single men want finished basements.
• Single men and married couples place importance on new kitchen appliances.
• Among all 33 home features in the survey, central air conditioning is the most important to the most buyers; 65 percent consider this very important.
• The next most important feature is a walk-in closet in the master bedroom; 39 percent considered this very important.
• Also important — buying a home that’s cable-, satellite TV-, or Internet-ready. Source: NAR

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The Real Estate Report March 20, 2013

Not Enough Homes For Sale?

Who would have thought that we could be entering the home selling season with a headline which says there are not enough homes for sale? After all, analysts had warned that the shadow inventory of homes held by banks would weigh down the markets for years to come. Where did these millions of homes go? Many were foreclosed upon. Others were sold by short sale rather than going through the foreclosure process as foreign and domestic investors bought millions of bargains. Also, many others were modified to help homeowners to remain in their homes as the economy has gotten stronger and provided more jobs for those who were unemployed. This stronger economy has meant that fewer home loans have moved into default in the past few years as well. On the other hand, there are still many homes waiting to be foreclosed upon.

How could we have a shortage of inventory at this juncture? Investor demand along with population growth and rising household formulation have all combined to remove excess inventory. Combine these factors with the fact that those who owe more than their homes are worth are reticent to sell. Even those who were foreclosed upon are starting to purchase again or need single family homes to rent. The question is not why is the inventory down, but will the lower inventory slow down the real estate market in the coming year? You can't have rising home sales with not enough homes for sale. We think that two factors will increase inventory in the coming year. Rising home prices will encourage more home owners to list their homes. And builders can create inventory by building more homes. Increased building activity is expected to help pump up the economy in the coming year. If real estate demand continues to rise, expect banks to accelerate the process to get rid of homes in their inventory. In other words, we are expecting the low inventory "problem" to be self-correcting during the year -- unless new demand outstrips this additional supply.

Fifty percent of Americans say they expect the housing market to improve in 2013, while 16 percent say they expect it to get worse, according to a Bloomberg National Poll of 1,003 adults. What’s more, the majority of the Americans surveyed said they have big hopes that the improvement in the housing market will also help give a boost to the overall economy. “Prices are very steadily, slowly, starting to creep back up,” Eric Matheny—an attorney from Fort Lauderdale, Fla., who recently purchased a new home—told Bloomberg. “The housing market is a major part of the economy, so it says something about the strength of the economy.” More Americans are expressing optimism about the trajectory of home prices too. Twenty-seven percent expect their home values to rise while 16 percent said they expect their home’s value to fall. In the previous survey, 20 percent predicted that their home’s value would rise while 20 percent had said they expected values to fall. Source: Bloomberg

Single family home tenants are 18 percent more likely than apartment tenants to stay in their current homes five years or longer, suggesting that demand for single family homes, the fastest growing rental category, will be more stable than multifamily demand, according to a new national opinion survey released by ORC International for Premier Property Management. Twenty-six percent of single family tenant plans to stay in place five years or more, compared to one out of five apartment dwellers (22 percent). Founded in 1938, ORC International is a leading global market research firm and since 2007 has conducted the CNN|ORC International poll. One factor contributing to single family stability could be high marks renters give the quality of single family property management. Some 80 percent of tenants in single family rentals said their property management was good or excellent compared to only 63 percent of apartment renters One out of four apartment dwellers (26%) rated their management as only adequate. “With the emergence of the single family rental option, American families have a new housing choice that brings them the aspects of associated with owning their own homes important to families such as living space, privacy, safe neighborhoods and the sense of community. Single family rentals can be found in virtually every community today and more and more families are choosing single family rentals either as a temporary stop on the road to becoming homeowners or as a permanent solution to their housing needs,” said Chris Clothier, director of sales & marketing and partner of Premier Property Management. Over half, 52 percent, of renters, including 60 percent of single family renters and 44 percent of apartment dwellers, said they anticipate becoming homeowners in the next five years. Families with three or more members (64 percent) and children under 13 (69 percent) were more likely to become homeowners than the 43 percent who don’t plan to become owners. Clothier said near term interest in becoming homeowners among single family tenants reflects the new roles single family rentals are fulfilling as a stepping stone to homeownership for first-time buyers and as a sanctuary for large numbers of families displaced by foreclosures but who plan to buy again when they can afford to do so. Source: ORC

The IRS no longer mails reminder letters to taxpayers who have to repay the First-Time Homebuyer Credit. To help taxpayers who must repay the credit, the IRS website has a user-friendly look-up tool. Here are four reminders about repaying the credit and using the tool:

·         Who needs to repay the credit? If you bought a home in 2008 and claimed the First-Time Homebuyer Credit, the credit is similar to a no-interest loan. You normally must repay the credit in 15 equal annual installments. You should have started to repay the credit with your 2010 tax return. You are usually not required to pay back the credit for a main home you bought after 2008. However, you may have to repay the entire credit if you sold the home or stopped using it as your main home within 36 months from the date of purchase. This rule also applies to homes bought in 2008.

·         How to use the tool. You can find the First-Time Homebuyer Credit Lookup tool at IRS.gov under the ‘Tools’ menu. You will need your Social Security number, date of birth and complete address to use the tool. If you claimed the credit on a joint return, each spouse should use the tool to get their share of the account information. That’s because the law treats each spouse as having claimed half of the credit for repayment purposes.

·         What the tool does. The tool provides important account information to help you report the repayment on your tax return. It shows the original amount of the credit, annual repayment amounts, total amount paid and the remaining balance. You can print your account page to share with your tax preparer and to keep for your records.

·         How to repay the credit. To repay the First-Time Homebuyer Credit, add the amount you have to repay to any other tax you owe on your federal tax return. This could result in additional tax owed or a reduced refund. You report the repayment on line 59b on Form 1040, U.S. Individual Income Tax Return. If you are repaying the credit because the home stopped being your main home, you must attach Form 5405, Repayment of the First-Time Homebuyer Credit, to your tax return. Source: IRS

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Happy Spring!

Happy St. Patrick's Day!

Don't Forget to Spring Forward

Jennifer Odom

Interesting March Facts....

INTERESTING FACTS... • Saint Patrick's day is in honor of the Patron Saint of Ireland, who brought christianity to the Emerald Isles, as Ireland is known. It is truly a day of celebrating Irish history, ancestry, traditions and customs. • Erin Go Braugh is perhaps the most common Irish term you will hear. It means "Ireland Forever". • Easter Lilies are a popular flower and sign of Easter. They are great as gifts for mom or grandma, or to decorate your home or office. Garden stores and floral shops force the blooms to peak as Easter arrives, providing a splash of color to the early spring season.

ALSO IN MARCH... • International Women's Day – Mar 8 • Daylight Saving Time Begins – Mar 10 • Saint Patrick's Day – Mar 17 • Spring Begins – Mar 20 • Palm Sunday – Mar 24 • Passover Begins – Mar 26 • Good Friday – Mar 29 • Easter – Mar 31

Rates are still at all time lows. Call me today to discuss your financing options!

 

Getting the Most from Your Mortgage at Tax Time

It's that time of year again: get ready to gather up the paperwork and settle in to get your tax forms completed. Whether you use a commercial software, stick it out on your own, or hire a professional, there are some documents you'll need to be sure you have to hand when you're maximizing the write-offs you can get by having a home mortgage. Staying Organized Hopefully you've been keeping all your paperwork organized throughout the year. If you haven't there is no better time than right now to start: Set up folders in your file drawers for 2013 and start putting the papers where they belong! When it comes to your home, you'll want to hang on to your mortgage bills and your year-end mortgage statement; any receipts for home improvements that increased the energy efficiency of your home; and any receipts for upgraded and energy-efficient appliances you have purchased. These documents are extremely important because itemizing your taxes is going to be the best way to maximize your deductions. Mortgage Interest and Insurance In general, the interest you pay on your home loan, whether it is a standard loan, a line of credit, or a construction loan, is tax deductible. Many people have refinanced recently and may be eligible to deduct the interest associated with the refinance as well. Specific restrictions do apply to the amount you can deduct and the types and numbers of properties that are eligible. In general you may deduct interest on your primary home and on one additional residential property. You may also be restricted by the type of loan you have; a home equity line of credit has different limits than a straightforward mortgage. At the end of the year you'll receive a Form 1098 from your lender which will clearly show your payments for the year and simplify taking the deduction on your tax forms. If you are a fairly new homeowner or if your home is underwater and your loan-to-value ratio is 80% or greater, you will have private mortgage insurance on your home. These payments are also tax deductible, depending on your adjusted gross income. As your AGI increases, the amount you can deduct decreases. Energy Efficiency Deductions According to the Energy Star website, you can get a tax credit of either 10% or 30% of the cost of a number of home energy efficiency improvements. These include: Heating, air conditioning, and ventilation (HVAC) Insulation Certain types of roofing Water heaters Windows and doors Solar energy systems Geothermal heat pumps Small wind turbines Fuel cells Check the website carefully as some credits apply only to primary homes, while others may be used on secondary homes as well, and some apply only to existing homes and not new construction. You must be certain to save your receipts and the Manufacturer's Certification Statement for your records. Points, Taxes, and Other Deductions Points are fees you pay when securing your mortgage. They will be clearly stated on your HUD-1 closing statement and on your end-of-year Form 1098. Points are deducted differently for first-time loans versus refinance loans so if you're doing your taxes on your own you'll need to read the instructions carefully. If you bought or sold a property in the past year, a portion of the real estate taxes you paid are eligible for deduction. State and local property taxes are generally eligible as well. If you own investment properties, numerous breaks may be available to you, for things such as the property's mortgage, costs of repairs and maintenance, and depreciation. Consult a tax advisor for more information. Real Estate: A Great Investment Despite the recent ups and downs in the market, owning a home is still a great investment and can give you substantial breaks when it comes to your taxes. If you have further questions about mortgages or home ownership, I'm happy to sit down with you for a no-cost and no-obligation discussion about advantages and options. Call me today to learn more! * We are not a tax advisory firm. The information contained in this article is for informational purposes only and may not reflect current tax year rules and regulations. Consult your tax advisor or the IRS for current tax year rules, restrictions and regulations.