Archive for Money

Cash is king!!!

Over the past 4 months, I am experiencing a great increase in real estate sales activities in the east bay and solano county, where we believe the market has reached its bottom.  Many contractor/investor buyers are snatching up these distressed homes at pennies on the dollar and then turning them around after fixing them up.  Of course, in order for these buyers to get the property at that price, the banks need to see CASH. 

In the foreclosure market, it’s not as important for you to provide the highest bid like it is in regular market.  Sellers want to get the most for their money, but banks want assurance that the buyer can pay.  In a situation where a buyer with 150k cash vs. a buyer willing to buy at 180k but need financing, the bank WILL take the 150k cash.

Distressed properties are selling like hot cakes because they are priced extremely low on the bank’s books.  For people that are afraid of going into the stock market right now and want a short time horizon to make money, this is the time to get in the foreclosure market, because the risk is extremely low right now given how cheap the homes are.  Even if you can’t flip it, it’s still going to serve is a good rental investment earning good cashflow.


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San Francisco Real Estate Report

Here are some data that might be useful.  This information is as of September 10, 2008 brought to you by an analyst…

Current Available Listings of ALL homes 2,061
QTY (not $) of all homes sold in past 30 days 393
Months of Inventory (based on above data) 5
Average DOM for ALL homes 62
Est monthly % rate of decline (if applicable) 4%

For the month of Aug 2008, the market has fallen 3.5% in price (Aug = $633/SF vs July = $656/SF) and 19% in sales volume (Aug = 393 sold vs July = 486 sold). The days on market increased by 19% from 52 DOM (July) to 62 DOM (August). These statistics are consistent with seasonal market trends. July has traditionally been the most active time for Real Estate in SF. Of the 2061 units available, 912 are SFRs and 1149 are condos/TH/TICs.  Although SFRs represent a smaller share of the market, there are more REOs than Short Sales for SFRs. Of the 912 SFRs, 43 are REOs and 84 are Short Sales. 13.9% of the SFRs are distressed listings. Of the 1149 condos/TH/TICs, 29 are REOs and 27 are Short Sales. Distressed listings only represent 4.8% of the condo/TH/TICs market. Overall as a county and city, only 8.9% of the market is represented by a distressed listing. These statistics do vary amongst the 10 sub-districts of San Francisco.   District 10 is the most severely hit with 24.9% of all active listings being a REO/Short Sale (354 Listings and 86 REOs/Short Sales).  District 7 is among the least hit with 0.03% distressed listings (132 listins and 4 REOs/Short Sales). As we approach the fall season, one can expect to see continued price and volume decline.

What do you think?  Do you agree or disagree?

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Who lives in San Francisco and how can people afford properties in SF?

In the process of understanding the demographics of people in SF, I came across some data that I thought people might be interested.  This data was recently compiled by Info USA, a company that provides consumer databases.  Here is a breakdown in terms of age groups…  Not to my surprise, there are very little seniors living in the city and with the cost of living, it’s probably also more difficult for people under 25 to live here.  However, with all these people, there are over 260,000 people that make less than 60k, 86,000 people that make between 60k to 100k, and only 108,000 people make over 100k a year.  With more than 40% of homes costing more than 500K and how strong the real estate market is in San Francisco, I wonder if the single people out there would try to obtain home ownership by partnering up with friends.  It might be a good strategy for some people so that they can start the process of wealth accumulation.  Thoughts?

Age Group No. of People Percentage
under 25 13915 4%
25-39 118779 30%
40-49 111251 28%
50-64 102275 26%
64+ 45368 12%

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How much is Transfer Tax and who pays for it in SF?

The Transfer Tax on Real Property is based on the total value or consideration for the property.

$100 to $250,000: $2.50 per $500 of value.
$250,000 up to $1,000,000: $3.40.
$1,000,000+: $3.75.

Who pays the Transfer Tax?

Most often in San Francisco the seller pays the Transfer Tax. Two exceptions are if you purchase property through probate or in a new development.

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Home owner tax deductions

Buying a home is one of the biggest ways to reduce your tax payment and start your long term savings and investment while enjoying the tangible benefits such as being able to live in it!  Buying a home is usually a person’s biggest investment, and also one that yields the most financial and tangible rewards.  There are good times as well as bad times to buy and sell real estate as pure investment (like stocks or anything else), but to me, it is NEVER a bad time to buy a HOME to live in.

 Here are some details about home owner tax deductions that yield tax saving benefits…

1. mortgage interest on a primary residence is usually fully tax-deductible, unless your mortgage balance exceeds $1 million or you took out a mortgage for reasons other than buying, building or improving a home. 

2. your lender will send you a 1098 that tells you how muchy mortgage interest you paid for the year.  you can record your interest deduction on line 10 in your schedule A, labeled “itemized deductions”.

3. real estate taxes are also fully deductible.  These taxes are approximately 1.14% in San Francisco, and are taxed annually based on the assessed value of your home. 

4. If you (or the seller) had to paid points on your mortgage, then the amount may also be deductible on the year that you purchased the property.

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Government Announces Conforming Loan Limit Increases

The Office of Federal Housing Enterprise Oversight (OFHEO) today announced it has temporarily increased limits on conforming loans offered by government-sponsored enterprises, Fannie Mae and Freddie Mac, from $417,000 to as high as $729,750 in fourteen counties in California for loans originated between July 1, 2007 and Dec. 31, 2008. Fannie and Freddie are reported to be working out new underwriting standards and expect to begin offering the new loans soon.

Also, on Wednesday, the government raised the conforming loan limit for mortgages guaranteed by the Federal Housing Administration, and has begun offering the maximum limit of $729,750 for 14 California counties, up from $362,790, for loans originated between now and Dec. 31, 2008.

The Fed’s economic stimulus package approved earlier this year called for temporary increases on conforming and FHA loan limits to allow troubled borrowers to refinance out of sub-prime loans and make it easier for many new buyers to qualify for mortgages in high-cost areas, particularly in California where home prices remain among the highest in the nation.

To view a list of the new FHA Mortgage Limits by county, go to:

FHA Loan Limits by County

For a list of the proposed loan limit changes for Fannie Mae and Freddie Mac, go to:

Fannie Mae and Freddie Mac Proposed Loan Limit Changes

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

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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