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Home sales increased 2.5 percent in March in California compared with the same period a year ago, while the median price of an existing home rose 20.8 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported 4/22/10.

“The end of the federal tax credit on April 30 will remove some urgency from the market, but is not likely to derail current market trends as favorable prices and low mortgage rates continue to attract buyers and investors,” said C.A.R. President Steve Goddard. “The March year-to-year median price gain of 20.8 percent was the largest in more than five years. With the number of homes for sale in the state expected to remain lean, gains in the statewide median price may well outpace the nation going forward.”

Closed escrow sales of existing, single-family detached homes in California totaled 516,590 in March at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 2.5 percent from the revised 504,200 sales pace recorded in March 2009. Sales in March 2010 decreased 2.5 percent compared with the previous month.

The median price of an existing, single-family detached home in California during March 2010 was $301,790, a 20.8 percent increase from the revised $249,790 median for March 2009, C.A.R. reported. The March 2010 median price increased 7.8 percent compared with February’s $279,840 median price.

“While the federal tax credit has helped drive sales, near record-high affordability resulting from current prices and low mortgage rates also has impacted the market,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Four years ago, the median price to household income ratio was at a record high of 10 to one. It’s now near a historic low of four to one.”

It took banks 27.9 percent longer, or 225 days, to foreclose on a property in California last month than it did in March 2009, and 0.45 percent longer than it did in February, according to data tracked by foreclosure data company ForeclosureRadar.com.

The foreclosure process is likely to take longer in the future, the report said, since banks delayed sending notice of trustee sale filings to borrowers until an average of 188 days had passed since the notice of default, up from 142 days in February.

That extra delay pushed ForeclosureRadar’s preforeclosure inventory estimate up 12.6 percent to 157,768, compared to February. The inventory estimate fell 12.1 percent year-over-year in March.

The inventory of bank-owned properties (REOs) in California dropped 26.5 percent year-over-year and 1.4 percent month-to-month, ForeclosureRadar reported.

Foreclosure filings have dived since last year, “when lenders caught up on a backlog of filings after delays caused by new notice requirements introduced in California Senate Bill 1137,” ForeclosureRadar’s report said.

The bill prevented lenders from issuing a notice of default before contacting the homeowner to explore options to avoid foreclosure and delayed filings for 30 days after that first contact.

Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification.  Enacted into law 04/12/10, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief income with federal law.  For debt forgiven on a loan secured by a “qualified principal residence,” borrowers will now be exempt from both federal and state income tax consequences.  The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence.  It includes both first and second trust deeds.  It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.

The tax breaks apply to debts discharged from 2009 through 2012.  Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions.  Most notably, taxpayers who are bankrupt are exempt from debt relief income tax.  Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage.  The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

A recent study of more than 22,000 homeowners who bought their homes within the last nine years found that current homeowners plan to be “more practical” in their next purchase, focusing on livable space rather than unnecessary upgrades. KEEP THIS IN MIND:

• Many of the luxury amenities once considered necessities among home buyers, such as community clubhouses, dog parks, golf courses, and 24-hour security, are no longer priorities, according to the survey. Repeat buyers also said a swimming pool isn’t a must, but a children’s playground with walking paths are essential.

• One of the takeaways from the survey, according to an architect firm, is that buyers nowadays should rethink space. For example, buyers should look for kitchen cabinets that go all the way to the ceiling for added space and efficiency. They also should pass on high-priced focal stairways, opting instead of steps that are tucked away and out of sight.

• Buyers also should be on the lookout for dead space. If the dining room or media room is eliminated, at least some of the square footage should be dedicated to secondary bedrooms. The once-standard 10-by-10 bedroom no longer is acceptable to most buyers.

• The survey also found that many buyers have transitioned toward green features, such as high-efficiency appliances, insulation, and windows that are not large areas of glass. However, many buyers did not report the use of recycled materials as a necessity.

• Other findings from the survey show that large kitchens, with islands, are desirable, as are main-floor master bedrooms, and two-car garages.

Full story at:  http://www.latimes.com/classified/realestate/news/la-fi-lew4-2010apr04,0,2602030.story

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state home buyer tax credits.  To take advantage of both tax credits, a first-time home buyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive.  Buyers who are not first-time home buyers may use the same time frames to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.
Under the federal law slated to soon expire, a first-time home buyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010.  Additionally, under a newly enacted California law, a home buyer may receive up to $10,000 in tax credits as a first-time home buyer or buyer of a property that has never been occupied.  The new California law applies to certain purchases that close escrow on or after May 1, 2010.