Is Cash still King??

We are in the middle of a crazy real estate market the Greater Sacramento area.  First time home buyers are being outbid by Cash Investors and Cash Buyers.    It is not uncommon to write over 10 offers for a first time home buyer in this market and sometimes still not get a home.  FHA home buyers are constantly being out bid due to the fact that they don’t have the necessary funds to pay more than the appraised value of the home and conventional buyers and cash buyers are purchasing the homes.

With this recent lack of inventory, the cash buyers are now being outbid by other cash buyers and we have seen homes selling for $20,000 over the list price.   Everyone is scrambling to find the deals only to find out that ship may have already sailed.

With spring a few month’s away and home prices on the increase, we should see more inventory coming on the market and some sellers with enough equity to move up in the market (an area we haven’t seen for many years).

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Fiscal Cliff and Real Estate

Late in the evening of Tuesday, January 1st Congress reached a settlement in the “fiscal cliff” negotiations, and President Obama signed the legislation January 2nd.  As a result, the Mortgage Forgiveness Debt Relief Act was extended another year.  The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including principal reduction), or foreclosure.
The same provision also expired in California, but Senator Ron Calderon (D-Montebello) introduced SB 30, which would waive the potential tax bill for Californians for all of 2013.  C.A.R. already signed on as the bill’s sponsor, and the two hope to fast track the bill through the Legislature.

Also under the fiscal cliff agreement, the so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.  These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000.  The thresholds have been increased and are indexed for inflation so will rise over time.  Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20 percent deduction.  The reinstitution of these limits has far less impact on the mortgage interest deduction (MID) than a hard dollar deduction cap, percentage deduction cap, or reduction of the amount of MID that can be claimed.

Capital gains rates on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 for married couples.

REALTORS® should encourage their clients to consult with their own tax advisers about their own individual tax situation.

Information provided by Sacramento Association of Realtors.

 

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Home Equity back on the Rise

Sacramento area homes on the increase, don’t miss this great article:
sacbee.com
Sacramento’s uptick in housing aids underwater owners

Published Saturday, Nov. 24, 2012

After the housing bubble burst, tens of thousands of people across the Sacramento region were trapped in homes worth less than they owed, with experts predicting it could be many years before they recovered their lost equity.

In the past six months, however, rising prices have substantially reduced negative equity in the region, real estate tracking firm Zillow said in a recent report.

Today, nearly 5,000 underwater homeowners are nearing the point where their home values exceed their loan balances.

If prices continue to rise next year, as Zillow and others predict, an increasing number of area residents will be able to sell their homes without harming their credit scores through short sales, in which lenders take less than what is owed.

Some have already taken advantage of their newfound freedom.

“It was a miracle from God,” said Leisha Aitken, who cleared her loan, paid her real estate agent and walked away with money to rent an apartment after she sold her 2,100-square-foot home in Folsom’s Empire Ranch in September.

Aitken, a pharmacist, found herself out of work earlier this year and struggled with her $2,800 monthly mortgage payment. She was sure she would have to do a short sale and put a major strike on her credit rating.

Then she met with agent Gillian Long, of Intero Real Estate Services’ Folsom Lake office. The two decided to test the fast-changing market and push the asking price above $400,000 – enough to pay off Aitken’s $373,000 loan balance and cover commissions and moving expenses. The house sold quickly for $400,000, or about $191 a square foot, higher than comparable sales in recent months.

“Gillian said if I had called her a couple of months earlier, I would have had to do a short sale,” said Aitken, who has a new job and is hoping to buy a condominium. “It was a good feeling to sell that house and get out. I never want another mortgage payment like that again.”

A major factor in Aitken’s favor was that she never sank too far underwater on her home loan. Even at the bottom of the market in January she owed only about 10 percent more than her home was worth. Thousands of others are in similar situations.

Almost half of area homeowners – nearly 168,000 households – remain upside-down on their mortgages to varying degrees. The total amount of negative equity in the Sacramento region is nearly $17 billion, according to Zillow.

Some homeowners are much closer to breaking the surface than others. About 53,000 homeowners across the region are underwater by 20 percent or less, Zillow estimates. About 9,000 owe less than 10 percent more than their homes are worth. And about half that number, 4,770, owe less than 5 percent more than their homes’ value.

That last group is “extremely close to being in positive equity territory,” said Zillow spokeswoman Camille Salama.

The Seattle-based firm, among the more conservative of forecasters, predicts home prices in the Sacramento region will increase by about 6 percent through the third quarter of 2013.

“As home values continue to rise in the Sacramento area there will be homeowners who will switch from being underwater to above water,” said Svenja Gudell, Zillow senior economist.

When that happens, she said, a larger number of traditional home sales could come on the market.

In recent years, foreclosures and short sales have made up the bulk of the market, and investors have been the major buyers. Having families buy and sell homes in the traditional manner would help restore a sense of normalcy to the market, she said.

And those who have positive equity will start spending again on home upgrades, she said. “It has to do with confidence and seeing return on investment,” she said.

Economist Jeffrey Michael, director of the University of the Pacific’s Business Forecasting Center in Stockton, said he agrees that “the prospect of those folks (who are only slightly underwater) getting above water in the next year or two is pretty good.” But he said he was skeptical they would help drive the housing market with new purchases.

Those who are newly above water will “be able to sell their house,” he said, but they “won’t have a ton of equity.” Only those who can bring other sources of cash to the table can buy another house, he said.

Local real estate professionals take a more optimistic view.

Pat Shea, president of Lyon Real Estate in Sacramento, said he thinks there is pent-up demand from people who have been in their homes for years and need more room to accommodate growing families or less room because their children have grown up.

Many will be eager to sell, and even if they can manage only a small down payment, will look to take advantage of today’s low prices and interest rates.

“You know there are some people itching to move up, down or sideways,” he said. “When they can do it, they will.”

© Copyright The Sacramento Bee. All rights reserved.

 

6W24ABOVEWATER_Jump

 

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Changes in the Market

If you haven’t seen this article that was written by Lawrence Yun who is chief economist of the National Association of Realtors, please read:

Seeds of a Housing Shortage

Sliding inventories and price increases could lead to overheated markets
October 2012 | By Lawrence Yun

The market is looking much improved today, with home sales and prices heading up. But within this improvement are the seeds of a long-term challenge: falling inventories.

The inventory of existing homes is at its lowest level in seven years, while newly constructed home inventory has hit a 50-year low mark. Falling inventory is causing home prices to shoot up higher and faster than most analysts anticipated. The national median price of transacted homes was up 9.5 percent in August. Other price measures, like Case-Shiller and the Federal Housing Finance Agency price index, which look at price changes in sales of the same properties over time, have been rising as well, at double-digit annualized rates in recent months. Of course, not all markets are this robust. Phoenix is looking to notch a 25 percent gain for the year, while Chicago is just emerging from negative territory.

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As winter approaches, inventory will slide further. Few homes are newly listed after Thanksgiving. Historically, inventory tends to be 15 percent lower in winter than summer. Last year’s seasonal decline was even more dramatic, at 25 percent. We hope we won’t see an inventory decline of that magnitude this winter. Home values rising much faster than income growth will markedly cut into housing affordability.

But that may well be what’s in store. Distressed home listings will continue to fall because fewer borrowers are now seriously delinquent. Home construction is up, but only reaching half of the historic average of housing starts. Even the many pent-up sellers—those normal, non distressed home owners who’ve been holding back for better market conditions—will not help the net inventory situation, because most of them will be selling to buy a trade-up property.

Slight seasonal relief should come in March, just as the spring buying season gets underway. But a deeper and longer-term issue to watch out for is the increasing possibility of a housing shortage across many parts of the country.

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New wave of foreclosures hit Sacramento again

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The Sacramento Beepublished an article September 26, 2011 with the following statistics compiled by RealtyTrac and Foreclosure-Response.org.  They placed our region’s shadow inventory at 53,256 homes in the four surrounding areas of Sacramento, Yolo, Placerand El Dorado counties.

They included in this number three categories of distressed properties:

  • 12,285 houses already owned by banks but not sold
  • 19,367 units whose owners have received an initial foreclosure notice, or notice of default, but have not been foreclosed on
  • 21,604 homeowners who are 90 days or more delinquent on their payments but have not received a notice of default

Lenderare starting to pick up the pace on repossessions once again.  The figures provided by RealtyTrac show foreclosures in the area soared 76% from July to August, the highest number in 11 months.

Based on this “shadow inventory” it would take a year and a half to sell these distressed homes.

To read the complete article by Rick Daysog of the Sacramento Bee click here

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Dim Forecast for Housing and Economy

ResiLandscape report, issued by analysts at Moody’s Investors Service warn that there’s a change the country will slide back into a recession, and they forecast a “longer and deeper housing correction.”

The chief economist for Moody’s Analytics said “We have lowered the near-term economic outlook and raised the risk of a double-dip recession from one in four to one in three.” 

He also says the US recovery has lost significant momentum since the spring.  Retailing, housing, business investment, and industrial activity have all weakened, and the job market is no longer improving.  After ticking higher to 9.6% in August, he is expecting the nation’s unemployment rate to drift back into double digits in the coming months.

Celia Chen, senior director for Moody’s Analytics expects house prices to fall until the 3rd quarter of 2011, significantly longer than Moody’s previous projections of a 1st quarter 2011 bottom in homes.  She says the flood of 4 million homes either in late-stage delinquency or foreclosure is clogging the foreclosure pipeline from the servicers to the courtrooms, creating delays.

Distortions due to the first time homebuyer tax credits previously offered are partially to blame for the expected double-dip.

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77% Live Paycheck to Paycheck

As the recession lingers on workers are really feeling it in their pocket.  Nearly eight-in- ten (77%) of workers in 2010 said they felt they lived paycheck to paycheck to make ends meet, up from 61% in 2009.  One-in-five (22%) said they have missed payments on bills in the last year in a survey conducted by Career Builder between May and June, 2010.

Some workers are making ends meet by dipping into their long-terms savings. More than one-in-five (21%) say they have reduced their 401(k) contributions or savings to get by; while 33% state they do not participate in any programs such as 401(k), IRA or retirement plans.  30% also reported they don’t put any money aside into their savings each month while 28% set aside $100 or less for savings and 14% save less than $50.

As a result some workers said they have made changes to their living and spending habits as follows:

  • Cut back on leisure activities – 54%
  • Used coupons or shopped at discount stores – 48%
  • Drove less to save on gas – 37%
  • Cancelled cable and other subscriptions – 12%
  • Used public transportation – 5% 

This survey found that six-in-ten felt that the recession has made them more fiscally responsible.

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