“Buyers who scrambled to close escrow in May to take advantage of federal and state tax credits before they expired impacted the number of homes sold last month,” said C.A.R. President Steve Goddard. “Although we expect sales to be lower in the second half of the year because of the absence of the government stimulus, they should remain above the long-run average and be significantly higher than the trough in 2007, when sales bottomed out.

“Although the tax credits are no longer available, it’s important to keep in mind that home prices are substantially below their peaks and interest rates remain at historic lows, making this a very affordable time for many first-time buyers to purchase a home of their own,” he said.

C.A.R.’s Unsold Inventory Index (UII) also rose to 4.8 months in June from 4.2 months in June 2009, but still remains lower than the long-run average of a 7.1-month supply of unsold inventory.

More information at: http://www.car.org/newsstand/newsreleases/junereport/

The company reported that 70,051 notices of default were filed at county recorder offices in California during the second quarter, down 13.6 percent from the first quarter and down 43.8 percent compared to second-quarter 2009.

Also, the share of resale, foreclosed homes sold in the state dropped to 36 percent in the second quarter, down from 49.9 percent in second-quarter 2009 and 42.5 percent in first-quarter 2010. NODs, which mark the formal entry of a home into the foreclosure process in California, peaked at 135,431 in first-quarter 2009.

The share of foreclosure resales ranged from 9.5 percent in the San Francisco area to 61.7 percent in the Imperial Valley area during the second quarter, DataQuick reported.

“Obviously, motivated sellers and accommodating lenders have played a part in bringing the default filings down, especially when it comes to short sales,” said John Walsh, DataQuick president, in a statement. “Public policy has also been a factor. We also need to remember that prices have come up off bottom over the past year. If they continue to rise, fewer homeowners will find themselves underwater, which is a significant factor in letting a home go.”

The company characterized foreclosure activity in the Golden State as “mixed” last month, with filings of new foreclosure notices on the rise and foreclosure sales down. That assessment follows two straight months in which ForeclosureRadar reported declines across-the-board at every stage of the foreclosure process.

In total, 10,506 foreclosures were cancelled in California last month before reaching the auction sale phase, according to ForeclosureRadar’s market data. The figure represents a 27 percent increase from May and is 153 percent higher than in June 2009. ForeclosureRadar explained that the increase was primarily driven by just one lender, JP Morgan Chase and its acquisition of Washington Mutual loans.

Notices of Default filed against delinquent homeowners – the first step in the foreclosure process – edged up nearly 7 percent from May to June, ForeclosureRadar reported, but were down more than 45 percent compared to June 2009.

Notice of Trustee Sale filings, which serve as the homeowner’s final notice before the home is auctioned, increased on both a monthly and annual basis in June. Compared to the previous month, filings were up nearly 22 percent, and were nearly 12 percent above year-ago levels.

During the month of June, ForeclosureRadar tracked a total of 25,790 new Notices of Default and 34,261 Notices of Trustee Sale.

“Historically it is very unusual to have more Notice of Trustee Sale filings than Notices of Default,” said Sean O’Toole, founder and CEO of ForeclosureRadar.com. “But with skyrocketing cancellations and the possibility of failing loan modifications, this will be increasingly common, as lenders are only required to file a Notice of Trustee Sale to restart the foreclosure process.”

ForeclosureRadar’s data shows that banks took back 10,506 properties in June, nearly 24 percent fewer than they did in May. The company puts California’s total REO inventory at 85,135 homes, down from 87,964 in May and nearly 20 percent lower than it was a year ago.

The number of properties purchased by third parties at auction dropped significantly in June to 2,983, but they purchased nearly the same percentage of the total properties sold, and at a better discount to market value than ForeclosureRadar says it’s seen in months. Last month, the average bid amount on a home sold at foreclosure auction in California was 18.9 percent below market value. 

By Ken Calhoon, Broker in Placerville, California

“A housing deficiency isn’t a sure thing, but the potential is certainly there.” says David Crowe, chief economist at the National Association of Home Builders, who paints a rather ominous picture in which house and apartment builders won’t be able to keep pace with demand.

Wishful thinking? Not according to the Census Bureau. The increased demand for new housing will come partly from new household formation, which (pre-recession) typically runs around 1.3 million new households each year. To keep pace, builders need to build 1.5 million new homes since more homes than households are needed to replace those destroyed by fires, floods, teardowns and neglect.  Not surprisingly, builders have not been keeping pace recently. This year builders will finish less than 400,000 new homes, the lowest number in the 47 years of record keeping.  

The worst recession since the depression has temporarily suppressed demand and household formation. In 2007, 600,000 households were formed, in 2008, 500,000, last year only 400,000 new households were formed. Kids are staying longer at home and some are returning to mom and dad’s to weather the economic storm. While new household demand has been stifled, the pent up demand continues to grow and will present huge opportunities when the economy recovers.    

New and surviving builders will also face an increasing regulatory environment which will increase the time to bring a new development on line and more costly to build. An example is the new California state law taking effect January 2011 requiring fire suppressant sprinklers systems installed in each new home. That can add as much as $10,000 to the cost of a new home. Being “green” also has a cost.

The Census vacancy numbers are somewhat misleading. The largest percentage of currently vacant homes and apartments is concentrated where nobody wants to live. Detroit and Chicago are not preferred relocation destinations. There is a reason the inventory is vacant. Some are second or vacation homes.

It may take a couple of years to get through our current inventory. While that’s happening, the population will continue to grow, new household formation will continue to be postponed and fewer new homes will be built. When the economy recovers, as it invariably will, there will be pent up demand for new homes but few available.

KEEP THIS IN MIND!

• The bill extends the deadline to close escrow for home buyers who entered into a home purchase contract by the April 30 deadline. First-time buyers may be eligible to receive up to $8,000 and qualified existing homeowners may receive up to $6,500 if the home buyer closes escrow by Sept. 30.

• Home buyers entering into sales contracts May 1 or later are not eligible for the federal tax credit, but they may qualify for the California home buyer tax credit.

• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® worked closely with members of Congress to extend the deadline. Estimates from NAR show nearly 180,000 home buyers nationwide would have missed out on the tax credit if the deadline was not extended, including nearly 17,700 home buyers in California.

• Many of the home buyers who would have missed out on the tax credit are in the midst of purchasing a short sale or foreclosure, which generally take longer to close due to the amount of paperwork involved in the transaction.

To read the full story, please click here:

http://money.cnn.com/2010/06/30/news/economy/homebuyer_tax_credit/index.htm

National occupancy rates for senior housing, which change in response to different factors than those that affect the rest of the residential housing market, registered a small drop in the first quarter of 2010, according to the National Investment Center for the Seniors Housing and Care Industry (NIC).

This increased housing availability reflects a decline of approximately 0.3% in occupancy for both independent living and assisted living facilities nationwide. Rental prices continued to grow, but at a slower rate than before, undoubtedly influenced by the increased availability of space.

The NIC expects the decline in occupancy rates to reverse in the near future, as reduced construction puts a cap on the supply of senior housing. [For more information on current construction in California, see first tuesday’s Market Chart, CA Single- and Multi-Family Housing Starts.]

first tuesday take: The demand for senior housing is primarily determined by one single factor: the number of senior citizens. Unlike factors affecting demand for other forms of real estate, this factor is always both quantifiable and predictable.

As a result, the senior housing market is rarely subject to the violent rises and falls that beset the housing market at large. As this news item shows, however, even the senior housing market is influenced by the state of the economy. The drop in occupancy rates is a temporary setback for a constant market, but you can expect it to be quickly reversed by the unstoppable forces of demographics.

The boomers are on their way to these facilities, and their dis-savings to pay for assisted living with be felt more by a stock market decline than a real estate sales decline. Savvy agents will be on hand to get those listings from the boomers as they shed their current residences and move to be closer to their grandkids.  Anticipate that trend correctly, and you may get rich on broker fees.

Re: “Seniors housing occupancy falls, rent growth continues,” from the National Investment Center for the Seniors Housing & Care Industry

Bradley Markano • Jun 10th, 2010  first tuesday Realty Publications, Inc.

“I see no signs of a double dip,” said John C. Williams, director of research at the San Francisco Fed. “The economy continues to gain momentum, and consumer spending and business investment continue to improve.”

The prediction goes counter to what many analysts believe, but Williams pointed to surveys that show home, car, and retail sales are up. “It’s kind of a natural part of the process — you cut back for a couple of years, and then you need to replace things eventually,” Williams said.

Source: Los Angeles Times, Alana Semuels (05/18/2010)

As the Federal $8,000 tax credit ends, it would seem that here, nothing is lost as the first time buyer can trade that credit for a $10,000 State tax credit.  However, they are far from similar. 

The key differences between the two credits are…

1. The Federal credit comes in one chunk $8,000 if you qualify – and relatively soon after which helps the home buyer recoup perhaps up to 100% of his move-in on the deal.
2. The Federal tax credit was not conditioned on a tax liability, thus even if you did not owe once cent in taxes, you could still receive the $8k – SWEEEEET! 

The State credit is paid out in 3 increments of maximum $3,333 each over tax years 2010, 2011 & 2012.  This is a lot less up front.  Secondly, and more important is this…you can only get the credit against actual state income taxes owed in those tax years.  

Here is a typical example on a first time buyer purchasing an average home at $275,000. 

On a USDA 100% loan (or FHA 96.5%) the payments (PITI) are about $2,000.  If the borrower meets guideline ratios of 31/41 for this purchase (assuming about 10% of income goes to other debts like auto, credit cards, etc) Annual income to qualify is $77,400. 

The tax writeoff for owning this home is about $11,000 so this tax payer itemizing his deductions will take off about $15,000 for taxable calculations.  A family of 4 on this income will have a State tax liability of $1,640 so that is the maximum tax benefit he car reap from the State credit.  Multiply this by 3 years and his $10,000 is diminished to actual credit benefit of $4,920 or less than ½ of the limit. 

What happens to the other $5,080?  Absolutely nothing!  The State of California is off the hook.  This means that the $100 Million designated to the first time buyer program is likely diminished to about $50 Million – pretty clever of your lawmakers.  This extra money will not be designated to go out to more first time buyers unless they re-write the law.  And they cannot compute the leftovers until 2013! 

“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.”

Home prices will begin to stabilize in 2010. “We’ve seen a steady downtrend in housing inventory for well over a year, and home prices appear to be in the early stages of stabilizing,” says NAR chief economist Lawrence Yun. “With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3 percent and 5 percent in 2010, but with wide geographic differences,” Yun says.