Archive for January, 2008

What’s really going on with the conforming loan amount changes?

January 24, 2008 at 4:53 pm · Filed under Real Estate ·Tagged ,

There had been a lot of rumors about the conforming loan amount being increased from the current $417k (it’s been the same amount in 2006, 07, and as well currently in 08).   But it has not taken in effect yet…  The most recent rumor indicates that it may “take effect” over the next 4-8 weeks (meaning in February or March).  But no one knows, and no one will know until the day it really happens.

Background:

In May 2007 the House of Representatives passed H.R. 1427,  it’s a reform act that increases conforming loan limit in high-cost areas to the lower of:

1. 150 percent of the national limit  OR
2. the  median price in such area

Based on the most recent calculation provided by a publication I dug up dated January 11, 08 from the Office of Federal Housing Enterprise Oversight (OFHEO),  if this reform went into effect, the single family home conforming loan amount should increase to $625,000 from $417,000.  If the housing market doesn’t drop further, the range MAY BE between $625k to $710k.

Message to the buyers in the Bay Area.  Given the  rate cut and potential  conforming loan limit increase, it’s time to be on the look out for some refi opportunities.

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There’s a new tax break aimed at new home loans

January 17, 2008 at 10:03 am · Filed under Money, Real Estate ·Tagged

Federal Reserve Chairman Ben Bernanke endorsed a “quickly” implemented fiscal stimulus package, saying it would complement the Fed’s efforts to provide monetary-policy insurance against an economic downturn.

Homeowners with a new mortgage that is covered by insurance can claim a tax break on the insurance for the first time this year.

The new break, called the qualified mortgage insurance deduction, lets taxpayers with an adjusted gross income of less than $100,000 write off the full cost of mortgage insurance. Folks who earn less than $109,000 can take a write-off for part of it.

To qualify, the mortgage must have originated between 2007 and 2010. The deduction can be taken for insurance on a principal residence or a second home.

Introduced by the Tax Relief and Health Care Act of 2006, the break initially applied only to the 2007 tax year, but it was extended through 2010 by the Mortgage Forgiveness Debt Relief Act of 2007.

“It’s something we will definitely ask our clients about,” said Jackie Perlman, senior tax research coordinator at H&R Block Inc. “If you come in and say you bought a home, we’ll be checking it out and making sure you get that deduction.”

The mortgage-insurance deduction will help first-time home buyers who are unable to put down 20%. Typically, “if you put down less than 20% down, that’s where the lender would require private mortgage insurance,” said Katie Monfre, a spokeswoman for Mortgage Guaranty Insurance Corp., a private mortgage insurer in Milwaukee owned by MGIC Investment Corp.

On average, the annual tax break from the deduction will be worth around $350 per taxpayer, according to the Mortgage Insurance Companies of America, which represents mortgage insurers.

Bob Meighan, CPA and vice president at Intuit Inc., which makes TurboTax software, said he doesn’t have an estimate of how many clients will take the deduction, but that claiming it is likely to be “pretty straightforward.”

Private mortgage insurance protects the lender, guarding against a situation in which a borrower defaults, leaving the lender unable to recover costs after foreclosing on the loan.

About one in 10 residential mortgages are covered by private mortgage insurance, according to Jeff Lubar, a spokesman for MICA. That number rises if one includes government loans covered by mortgage insurance.

Info Source: Wall Street Journal

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How is dollar devaluation impacting real estate?

January 17, 2008 at 10:00 am · Filed under Money, Real Estate, Real Estate Buyers, Real Estate Sellers ·Tagged ,

With the dollar down and home prices falling, U.S. residential property is attractive to overseas buyers.  The International Herald Tribune said that there’s been 4%  increase in overseas buyers  purchasing homes in the Unites States over the past 2 quarters.

So where are they buying?   Their survey claims…

  • 26% of overseas buyers purchased a home in Florida.
  • 16% bought in California.
  • 10% bought in Texas, with the Gulf Coast being popular.
  • 6% purchased in Arizona.
  • 4% bought in New York.
  • 3% snagged a home in Colorado.

Of those buyers, 33% were from Europe, 24% hailed from Asia and 16% came from Latin America!

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What is the overall California housing market outlook in 2008?

January 13, 2008 at 10:13 am · Filed under Real Estate, Real Estate Buyers, Real Estate Sellers ·Tagged ,

California experienced a year of weaker than expected home sales in 2007. Sales of existing detached single-family homes, which declined 23.6 percent for the year 2006, were projected to decrease another 26.0 percent to 353,200 homes for the year 2007.   However, sales fell steeply in the last quarter of the year as the liquidity crunch severely constrained availability of funds for mortgage loans.  Monthly sales fell below 300,000 units on a seasonally adjusted and annualized basis, levels that had not been seen in over 20 years.

Despite the decline in sales, the statewide median home price set a new record of $597,640 in April and remained near record levels for much of the year. This was partly due to the downward stickiness in prices in a slowing market, but also had to do with the mix of sales in 2007 compared with prior years. While low- to moderately-priced markets suffered throughout the year, the high end of the market, such as San Francisco and other major urban cities, was somewhat more resilient and propped up the statewide median price. However, with the onset of the liquidity crunch later in the year, that market segment saw weakness both in sales and prices and forced the statewide median price below $500,000 in October and November for the first time since early 2005.

In general, lower-priced markets experienced large sales declines and weaker home prices as compared to higher-priced markets in 2007. Sales through August for homes valued below $500,000 declined 24.6 percent year-to-date, and sales of homes between $500,000 and $999,999 fell 24.2 percent when compared to 2006. By comparison, sales of homes priced $1 million and above declined only 0.5 percent from the same period of last year. However, the liquidity crunch choked off sales beginning in September, with the $500,000 to $999,999 market experiencing year-to-year sales declines in the range of 50 percent through the end of the year, and the market over $1 million market showing year-to-year declines of roughly 25 percent.

The housing market is unlikely to see significant recovery in 2008. A further six percent decline in sales is expected for the year 2008. Peak to trough, annual sales are expected to decline 47 percent from peak levels of approximately 625,000 homes in 2004 and 2005 to 332,000 homes in 2008. Meanwhile, the statewide median price will show its first decline since 1996, with a projected 5.5 percent annual decline in 2008 to $536,500.

As the economy remains in the late stages of expansion with many mixed signals, economic growth for 2008 is expected to be positive, but will be below the potential GDP growth rate of 3 to 4 percent. The California economy should grow on a par with the national economy, with non-farm job growth increasing 0.9 percent, and unemployment rate approaching 6 percent in 2008.

Current market problems have their roots in financing, not in weakening economic conditions. As such, this is not like the situation in the 1990s. Market weakness will continue to be driven in part by the ongoing problems in the subprime arena. Subprime mortgage payment resets are expected to peak in late 2007 and early 2008, so defaults and foreclosures should crest later in the year before easing as the year draws to a close. This will continue to put downward pressure on home prices, particularly in parts of the state that had a lot of new home building. Improvement in market conditions is more likely in the latter part of the year, as mortgage problems begin to subside and as buyers and sellers sense that home prices may have stabilized.

(datasource: California Association of Realtors Report)

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Should a buyer purchase a property that’s been “Ellis Acted”?

January 3, 2008 at 12:48 pm · Filed under Real Estate, Real Estate Buyers ·Tagged ,

Ellis Act is a state law that allows a landlord evict everyone in a building to convert that building to condos or TICs. For 5 years post Ellis eviction, no unit in that building can be rented to anyone for more than the evicted tenants paid + any rent control increases. For 10 years post eviction, the evicted tenants have first dibs on the unit from which they were evicted. So, an Ellis eviction limits what you can do with a property as a rental for a long time.

Also, there’s some local history with the law. During the tech boom years, there were a lot of stories circulating about landlords “Ellising” people, mostly low income people with poor English skills that didn’t know their rights, and then turning around and renting properties for market rates. SF is a very political town, and a lot of potential buyers might view Ellised buildings as tainted.

Last thing important to know from the landlord’s perspective, if the landlord “Ellis” a protected tenant, the building will never be allowed under current SF law to convert to condo – your agent should always determine how a building was vacated and that the method is well documented for the future.

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