Shirley Kistler's Real Estate Blog: Serving your Real Estate Needs in Sacramento, Placer and El Dorado Counties

Americans have a renewed interest in all things frugal during this recession.  They’re spending less money, using credit cards less. 

About ½ of Americans report they either avoid shopping altogether or shop only for those things that are absolutely needed, according to a survey sponsored by Citi.  72% of Americans say they have cut back on everyday expenses. 

In addition, 80% claim to have at least a plan for income and expenses, up from 47% in 2006, according to a survey by Synovate commissioned by personal finance author Matt Bell. 

Since consumer debt peaked in 2008, Americans have chopped $922 million from their debt, or 7.4%, according to the Federal Reserve.  Americans are reducing debt at a pace unseen in at least a decade, according to a recent Fed report.

 How do we make these changes? 

Change your words – instead of a temporary exercise in deprivation, view it as a lifestyle. 

Have goals – “I’ll pass on purchasing this item because I want to go on vacation in June.” 

Track Progress – Monitor your debts and vacation accounts.  When you see that spending smart is getting you closer to accomplishing your goal, that’ll motivate you to keep going. 

Make savings automatic – The easiest way to save is to have your savings deposited automatically from your paycheck to a savings or retirement plan. 

Make a windfall rule – When you receive a sudden increase of cash (i.e. tax refund, bonus, gift); make it a rule that these are used to paying off high-interest debt or savings.

 Source: RIS Media

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Despite the rising number of renters in the U.S., it is cheaper to buy a home rather than rent one in 72% of the 50 largest cities according to an index released by Trulia.com. 

Trulia’s rent vs. buy index compares the median list price with the median rent on two bedroom apartments, town homes & condominiums listed on Trulia.com as of 1/10/11. 

In 36 out of 50 of the country’s most populous cities, buying a two-bedroom home is less expensive than renting one.  These cities also include many areas that have been hit hard by foreclosures, such as Sacramento.

A price-to-rent ratio of 1 to 15 means that it’s much cheaper to buy than to rent in a particular city.  A ratio between 16 and 20 means that it’s more expenseive to rent than to buy, but depending on the family’s situation, buying could “make financial sense” the side siad.  Any ratio above 20 indicates that owning is much more costly than renting in a city.

Top 10 cities to buy vs. rent:

Source: Trulia

In 10 cities, renting is cheaper, but buying might make more financial sense, according to Trulia. These cities include Los Angeles, Boston, and Fort Worth, Texas.

The index considers the total cost of homeownership compared to the total cost of renting. Calculations for the total cost of homeownership include mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase, homeowners association dues, and private mortgage insurance. The homeownership cost calculation also includes tax advantages from mortgage interest, property tax and closing-cost deductions.

Calculations for total rental cost include rent and renters insurance.

The total cost of homeownership was highest, compared to the cost to rent, in New York; Seattle; Kansas City, Mo.; and San Francisco.

Top 10 cities to rent vs. buy:

Source: Trulia

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Effective January 1, 2011, California first trust deed mortgage holders who consent to a short sale of residential property (up to 4 units) are prohibited from seeking a deficiency judgment for the difference between the mortgage balance and proceeds realized through the sale. 

Senate Bill931 was passed by legistature in August and approved by the Governor on 9/30/10 to help strapped homeowners.

See the complete article at Realty Times 

Image via Wikipedia

Your credit score is a three-digit number that helps lending institutions assess their risk associated with lending you money.  They are used for loans, credit cards, renting, insurance and background checks on employment.

People with lower credit scores may pay higher interest rates or may not be approved at all.  Those with higher, less-risky credit scores often qualify for lower interest rates and special options.  Credit scores are calculated based on computer “predictability” models that analyze credit information and patters from your credit report against those of other consumers.

There are trillions of score combinations used in the calculations.  Most scores are calculated and provided individually by each credit bureau, including the three major ones in the United States, which are Experian, Equifax and TransUnion.  Additionally, many lenders use third-party credit scoring systems, such as FICO, NextGen, CE Score and VantageScore.  For consumers, the variations in scoring models and score ranges can create some confusion.

In 2006, the three major bureaus joined forces to create a single credit scoring system called the VantageScore.  The VantageScore and FICO model lead the industry as competitive rivals in credit-scoring systems.

Your VantageScore may not be exactly the same if your lender only orders a credit report from one of the bureaus.  This is because the data each bureau receives may be slightly different.  If your lender does not report your payment history to Equifax but does report to Experian and TransUnion, it will create a difference in scores.  The VantageScore should be more consistent across all three bureaus since the mathematical formula is the same.

Unlike FICOs traditional 300-850 credit score range, the VantageScore ranges from 501-990.  There is no way to compare the results of the VantageScore to a FICO score especially when the formulas are constantly changing.  However, to put some perspective in place a 650 FICO score approximately compares to a low, 800-range VantageScore.

The one constant for both scoring systems is that paying your debts on time will typically be the primary factor that positively impacts your credit score.

According to an analysis of more than 25,000 loan quotes and purchase request on Zillow Mortgage Marketplace during the first half of September; almost 1/3 of Americans are unlikely to qualify for a mortgage because their credit scores are too low. 

They found that 29.3% of borrowers have a credit score less than 620.  The lowest rates went to 47% of borrowers with excellent credit scores of 720 or above. 

Zillow Mortgage Marketplace quoted that during this period, borrowers with excellent scores got an average rate of 4.3% for conventional 30 year mortgages.  Mid range borrowers with credit scores between 620 and 719 received rates between 4.73% and 4.44%.  Those with credit scores below 620 received too few loans to calculate the interest rates received. 

For each 20-point credit score increase, the average annual percentage rate (APR) declines 0.12%.

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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 3^rd quarter of 2011, significantly longer than Moody’s previous projections of a 1^st 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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New data was released on 9/22/10 by Treasury and HUD on the Home Affordable Modification Program (HAMP).  Just over 33,000 homeowners received a PERMANENT HAMP modification in August, 2010.  This figure is down 27% below the number of PERMANENT HAMP modifications in July, 2010. 

The borrowers whom received the PERMANENT HAMP modifications have seen their mortgage payments drop by a median of 36%, or more than $500 per month.  Homeowner’s who received these modifications saw their housing expenses fall from 45% to 31% of their monthly income. 

In August, 2010, 26,628 TRIAL HAMP modifications were added to the HAMP roster.  Currently there are 202,521 active trial modifications.  Federal officials are pushing the loan servicers to make decisions for borrowers who have completed the trial phase and either drop them from the program or make them permanent modifications. 

The Treasury stated that the most of the cancellations are due to insufficient documents received or missed or late trial payments.  In addition, if their principal housing expenses are already less than 31% they do not qualify for the program.

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We have heard rumors that the Obama administration has discussed the possibility of getting rid of the Mortgage Interest Deduction (MID).  “Say it ain’t so, Joe”. 

According to the USA Today, the government spent about $80 billion last year to back up the mortgage interest deductions.  One housing specialist says it wasn’t worth the money because the tax break only goes to the wealthy???? Does this sound familiar? 

Home owners already pay 80 to 90 percent of the income tax in our country, and among those who claim the MID, almost two-thirds are middle-income earners. 

The national taxpayers union tells us nearly 39 million people claimed the mortgage deduction. (Nearly 67% of Americans own homes).

For those in the $100,000 – $200,000 income range the MID claimed was almost $14,000; meaning the value of the write-off would be $3,500 

For those making $75,000 – $100,000, the deduction was around $11,000; resulting in a savings of $2,800 

For those making $50,000 – $75,000, the average deductions was around $10,000 with a savings of $2,500.00 

Through the terms of 17 presidencies, the MID has brought remarkable stability to the housing market.

Fannie Mae “FNMA” took back 130,767 foreclosed properties in the 1^st and 2^nd quarters of 2010 and they were holding 129,310 single-family Real Estate Owned “REO” properties. 

Fannie Mae with such a large inventory announced incentives to buyers and sellers of its REO properties.

 On 9/22/10, the program announced a seller assistance incentive for properties listed on their REO website, HomePath.com.  They are also expanding the initiative to offer additional incentives to real estate agents and brokers.  Qualified owner-occupied homeowners can received up to 3.5% of the sales price which may be used towards the buyer’s closing costs including a home warranty.  Buyer’s agents may also qualify to receive a $1500 bonus.

 Eligible offers must be submitted on or after September 23, 2010 and must close by December 21, 2010.  The maximum amount of days to close escrow is 60 days from acceptance of their offer.

With the Sacramento Real Estate market full of Short Sale Properties for Sale it is taking longer to close on the purchase of your new home.  Due to the vast number of short sale properties available, the banks are starting to back up again on the approval of short sale properties.

If you are unwilling to wait a minimum of 60-90 days for an approval of your offer then a short sale is NOT for you.   With the decrease of inventory available for sale in the Sacramento area, we are seeing an increase of multiple offers on our listings for sale.   We are also seeing quite a few buyers who are unwilling to wait for short sale approval.   This is the main reason we take BACKUP offers on our listings and ask that our buyers be held in backup position.  We have seen countless buyers who are in 1^st, 2^nd and even 3^rd backup position get their home.  Patience is the name of the game in the short sale process.  

If you are making an offer on a Short Sale Property, be prepared for a lengthy process.   Updates are sometimes hard to come by, but working with a diligent agent who is well versed in Short Sales will help make the process quite a bit smoother and sometimes quite a bit faster.