Extension of Home Buyer Tax Credit into 2010

The home buyer tax credit was extended into 2010 allowing First-Time Home Buyers a chance to receive a Tax Credit of up to $8,000 until April 30, 2010. It also offers current home owners a chance to receive a credit of up to $6,500 who purchasing a new or existing home between November 7, 2009 and April 30, 2010

Home Buyer Activity Still Outweighs Available Supply

Despite heavy buyer activity, the Santa Clarita Valley continues to experience very tight inventory levels. Santa Clarita which includes the following cities: Valencia, Stevenson Ranch, Newhall, Saugus, Castaic, Canyon Country, Acton, and Agua Dulce currently has a total of 655 available active listings as of November 10, 2009. Additionally there are 524 homes currently pending sale going through escrow. Inventory is so dynamic right now that it is estimated we have about 1.5 – 2 months supply of homes on the market and as a result sales for many months this year (2009) are down from where they were a year ago in (2008).

Although the Tax Credit (before it was extended and revamped) had many Buyers entering the market anxious to secure a home and close escrow by the expiration on November 30, 2009, it was the amount of inventory that continued to limit the amount of closed transaction. You’re probably thinking that when the banks release the foreclosure homes things will be different, we will not have enough demand and prices will plummet further. That is definitely a possibility, but I don’t believe it will be the case. From many interactions with clients, agents, lenders, and being in the trenches everyday, I believe that if an increase in REO/Foreclosure homes happen to FINALLY come to the market it would be a good thing for a few reasons:

• It would allow buyers who have been wanting to purchase an opportunity to get their chance
• Banks would be able to liquidate their assets allowing funds/proceeds to go back into the system
• It would free up decision makers at the banks allowing them to put their focus to short sale transactions which would ultimately become quicker and more efficient, and so on…

Touching on the new extension of the tax credit refund briefly, the extension is beneficial because it will allow many new home owners to utilize the benefits offered for the next few months. Furthermore, for the home owners that were hoping the tax credit was extended to them, that is now a reality for some. The new revision extended the benefits to include existing home owners who have owned and occupied a residence  for at least 5 of the past 8 years. There are new income limits as well, so please be sure to check your qualification eligibility. With these changes in place, I am hoping that we see more inventory so that “qualified” Buyers can utilize the incentives offered to them.

Getting back and looking at data for successfully closed transactions  in Santa Clarita for the 2009 calendar year thus far, a total of 2,859 homes have sold and that number continues to increase on a daily basis. Sure, that is a lot of homes sales, but now for the interesting part: Out of that number, 2,387 of those sales have been at or below the $500,000.00 price range, meaning that 472 of the closed transaction were priced at $500,001.00 or more. Now you might be wondering, what I am getting at. Well, taking these numbers into consideration I find it very difficult to say that a bottom in the housing market is nowhere in sight. Does that mean housing prices done sliding? NO, housing prices are not done sliding, in fact, the higher end homes will face more downward pressure than lower priced homes simply because of the limited number of qualified Buyers able to afford them. ** Almost 5 times as many Buyers are able to afford a home priced $500,000.00 or less**. Which leads me to say confidently that we are entering a point where buyers are feeling confident again, and that is the first step!

My new video segments

I am starting to put together video segments for people who are interested in knowing about the current real estate market trends, activity, and news along with events and activities that will be going on within our community. Take a moment to watch this brief intro. I hope you enjoy it. If you have any suggestions please do not hesitate to notify me.

Click here to watch

Senate OKs extension of home-buyer tax credit!

The measure is expected to be approved by the House and signed by Obama within days. It is aimed at giving the real estate market an added boost and would expand the credit to existing homeowners.Reporting from Washington – The Senate today voted to extend and expand a tax credit for home buyers as an added boost for the recovering real estate market, and also approved a provision to continue giving aid to the long-term unemployed.

The measure, adopted on a strong bipartisan vote of 98-0, also would extend and expand a tax benefit for businesses with losses. The House is expected to follow suit within days, and President Obama is expected to sign it into law.

To keep fueling the real estate rebound, the legislation would extend the $8,000 tax credit for first-time home buyers to April 30. It now is set expire at the end of the month. More importantly, it also would provide a new $6,500 tax break for existing homeowners who want to move up to a new home, as long as they have lived in their current residence for five consecutive years out of the last eight.

The bill also would increase the level of qualifying incomes to $125,000 for individual tax filers and $225,000 for joint filers. Those earning up to $145,000 individually or up to $245,000 jointly would get a smaller credit that decreases as income rises.

The tax credits apply to home purchases of $800,000 or less.

“Every economist will tell you we have to steady the housing market before the economy will turn around,” said Sen. Christopher Dodd (D-Conn.). “We can’t afford to let this tax credit expire now.”

Home Buyers deliberately pass up opportunities

Working with Buyers in this market is definitely challenging, therefore I find it paramount to educate clients on the state of the housing market. With the availability of housing choices remaining extremely low and opportunities being hard to come by with little sign of change in the near future is leaving Buyers frustrated and distraut.

It is paramount for Buyers wanting to purchase in this market to understand and be fully educated on the market. The past and current market trends, competition and knowledge of knowing what to expect when entering a purchase agreement situation should be touched on. Using the Santa Clarita housing market as an example, explaining that there are approximately 607 active listings on the market with about 36% of the listings being short sale listings is significant. Why is this important? This means that very few homes are likely meet your desired criteria, few homes will fall within the areas you might desire, and if you find a home that does, it will likely have multiple offers submitted on them. Additionally, a large number of the short sale listings are unable to be purchased within a normal 30-60 day escrow period. Furthermore, this type of market has been around for most of 2009 and signs indicate that this market will be here through 2010.

With that said, is it wise for buyers to intentionally miss an opportunity. Especially one that initially didn’t work out, and then happened to fall back into their lap? This answer will be different for everyone, and it depends on the individual home Buyers perceptions of the market. However, deliberately missing an opportunity after the potential outcomes are clearly explained, is a mistake. To make the situation worse, deciding to agree to the Sellers original terms offered after loosing the home to another Buyer in hopes of saving the deal is an even bigger mistake.

Honestly, if Buyers understand the housing market activity, have lost other housing opportunities, watched home prices increase, and don’t see that things will turn in their favor, then “YES” make a decision to secure that home.

Extension of the Tax Credit is pointing to YES

Finally!!!

The question that has had many prospective Buyers worried with uncertainty is now almost a reality! The Tax Credit Incentive to Home Buyers appears that it will be extended, but with a few modifications to the program. Although without seeing the actual Bill, it is unknown what will be modified, a couple changes that really stood out was in the articles were:

• Repeat Buyers who have lived in their homes for 5 consecutive years would qualify for an incentive;
• Income limits for single and married couples are being increased quite a bit from the currently offered tax incentive.

Read it here: Homebuyer Tax Credit Measure Backed by Administration (Update2)

Read it here: Senators agree to extend homebuyer tax credit

October 26, 2009 Santa Clarita Market Activity

Uploaded by www.cellspin.net

Is the $8,000 Federal Tax Credit Necessary?

The $8,000 First-Time Home Buyer tax credit will be coming to an end within the next few weeks, but a lot of discussion has been circulating about a possible extension. Although it seems likely that an extension will be granted, nothing is certain until all signatures are in place nobody knows for certain if it will be extended. Many professionals in the business feel that it will be extended and that it is needed in order to keep the housing market stimulated. Others feel that the tax credit should not be extended because they believe it assists in inflating the purchase price of homes and causes prospective Buyers to buy more home than they normally would, ultimately causing a mini-bubble; Therefore this credit should not be extended into 2010.

While there is no doubt the tax credit is positive for the housing market, and contributed to increased demand which has helped pull the market out of a slump. I do not think it is absolutely necessary to keep Buyer interest.  Moreover, whether an extention is or is not granted, I do not see it having a severe impact on the current demand we are witnessing in housing market, at least here in the local market here in Santa Clarita.  I say this because, in the local market here in Santa Clarita, California (I am not familiar with other housing markets in the United States and how they are reacting to this credit), we have witnessed home prices being inflated currently because of the severe lack of available inventory and the outrageous increase in Buyer demand. That is not to say that with no tax credit incentive and an influx in inventory prices will continue to increase. I think that a stabilization within the housing market is not far off into the future.

Although it is evident the federal tax credit is a great incentive for First-Time Buyer’s, I do not feel it is the primary catalyst for the current Buyer activity. From my experience and interaction with clients, most are realizing the benefits of purchasing during this current state of the market due to housing prices being significantly off their high’s, and having interest rates at historical lows.

Nevertheless, consumer confidence still lacks as economic data pours in from the media about mortgage defaults, foreclosure filings, etc. and skepticism remains about what the future holds for the housing market. This is causing many potential home Buyers to wait on the sidelines to see if  housing prices will be pressured to decline further. On a positive note, there have been positive signs of improvement over the past year that should be recognized. Of coarse there is no full proof way to buy a home at “The Bottom”, I feel that certain markets which have the infrastructure in place to offer jobs, and support growth are finding their bottom, if they’re not already there. Thus, a decision to purchase a home at this point in time more than likely will not be regretted, even if 2010 does bring another wave of foreclosure listings to the market.

I hope that this information has brought some useful information to you. Additionally I would like for you to Watch an interview with Real Estate Agent Barbara Corcoran discussing the housing market on The Today Show.

MSNBC Video – Home Buyers fight frustrations to get deals!

Click here to watch the video:

Oct. 21:
A short sale of a home can mean a great deal for the buyer, but is it worth the hassle? NBC’s Michael Okwu reports.

 

 

more about “MSNBC on Short Sales in Santa Clarita“, posted with vodpod

What’s happening today in Santa Clarita’s Real Estate Market?

Coming into the tail end of 2008 and for all of 2009 anyone who has been active in the market has noticed a definite shift in supply and demand. Housing choices and availability have been minuscule while Buyer demand has been increasing at a shocking rate, this has caused a shift from a “Buyer’s Market” into more of a “Seller’s Market”. Despite what the media portrays, Santa Clarita and many parts of the nation are definitely seeing a positive change in the market place. 

There is no question that today is an excellent time to purchase a home. First-Time Buyer’s know this, investors know this and so does everyone else in between. Sure there are First-Time Home Buyers either who are, or that are anxious to take advantage of the $8,000 Federal Tax Credit which expires November 30, 2009, but also, a large amount of Buyer’s have been unable to afford a home for the last few years, and now homes have come into striking distance for them. Investors have noticed that properties have cash flow capability and/or an attractive rate of return (ROR) on investment so they to are adding to the already active buyers in the market.  Nevertheless, historically low interest rates  along with the significant price declines have made purchasing more attractive to renters, as often times the benefits and cost of home ownership out weigh renting

Looking at the inventory as of October 20, 2010 detailed below, it’s evident that it remains extremely low.

• Homes Actively for Sale: 595 – Out of the active listings: 382 are not short sales
• Homes Accepting Back Up Offers: 541 – Out of the Homes Accepting Back Up Offers: 134 are not short sales
• Homes Pending Sale/In Escrow: 532 – Out of the Homes Pending Sale/In Escrow: 274 are not short sales
• Closed Sales Year-to-date: 2,666 – Out of the Year-to-date (YTD) Close Sale Transactions: 2022 are not short sales

Looking at the numbers shown above, it’s important to note that if all the homes were able to go through escrow within 30-45 days while demand remained constant, it would indicate that we have approximately 1 to 1.5 months of inventory. However, take note of the following percentage of short sale properties:

• 36% of the Active listings are Short Sales
• 75% of the home accepting Back up offers are Short Sales
• 49% of the homes Pending Sale/In Escrow are Short Sales 
• 24% of the YTD Closed Sales were Short Sales

What do these numbers mean? Out of the active listings there a number of “Short Sale” homes that are not “Salable” today and therefore are unable to Close Escrow within 30-45 days which only helps to increase demand on “Salable” homes. 

Take short sales out of the picture for a moment, and notice that remaining inventory available are either foreclosures, or equity sales. With so much pent up demand and the limited number of homes available to purchase NOW, it is easy to see why “Equity Sales”, Investor Owned Properties, and Bank Owned Foreclosures becoming available with effective pricing are receiving numerous offers, selling over list price, and selling extremely fast. (**Due to complications with some appraisals and implementation of Housing Valuation Code of Conduct, Buyers are sometimes asked to waive appraisal contingencies**)

You may be asking yourself, what about new construction? I did not mention new construction in my analysis because most builders in the area do not have standing inventory available which means that a prospective Buyers will be required to wait 6+ months for their home to be built. (But if you do visit new developments, you will likely be shocked to find out that most of the projected home sites are selling out). Additionally, some home builders have discontinued or threatened the though of discontinuing development until they feel a clear forecast of what lies ahead for housing market and economy is on the horizon.

With that said, if you are looking to avoid competition and potential bidding wars, short sales might be an avenue to consider. If you have the patience and discipline to pursue short sales with your Real Estate Professional, there are many available to you. You may be surprised to find that sometimes you can get a great deal simply because many Buyers find another home prior to final approval of short sale. I’m not implying that you should find the 1 (one) short sale that peaks your interest, write an offer stop your search, and wait with your fingers crossed, in fact any advice or thought to do just that is a BIG mistake that often costs you other opportunities, and will leave you with an uncertain future in your house hunting journey.

**When I work with my clients I advise them of the situation and potential pitfalls of these transactions, while explaining that short sales are a starting point and nothing more. NEVER stop your search because short sales are not 100% guaranteed. Keep looking and if the short sale happens to get approved and you have not found a home, then go back analyze price and terms, and decide which route is best for you.

In closing, it is important to note that if you are a Buyer in this market looking under $500k expect to encounter competition (even on short sales). It seems to be that writing 8+ offers on different homes today is the norm. If you’re unable to secure a home right away, do not give up! be persistent and your efforts will pay-off.

Check back soon for how I think the unsuccessful short sales and upcoming foreclosure homes might impact the local housing market.