Welcome to the "Z" Team! Douglas and Bud Zeller

Mega-investor Warren Buffett and a group of top corporate leaders are weighing in on a key issue that’s crucial to a sustained real estate recovery: How long will the good economic news we’ve been getting lately continue? Are we going to be let down later in the second half of the year, or is the current, slow-moving national economic growth pattern a long term trend?  Buffet told his annual stockholders gathering in Omaha that, the economy is showing “significant” and persistent improvement for the first time since the financial crisis broke in 2008.

Other top business leaders polled by the Conference Board — and quoted last week by the Wall Street Journal – said they are now “confident that the U.S. will see sustained growth through 2010″ – with moderate gains in employment, consumer spending and consumer confidence.

That’s hugely important for housing of course – and offers a strong answer to economic doomsayers who predict a sharp drop in home sales and real estate activity following the expiration of the tax credits. The latest housing and mortgage numbers certainly look encouraging:

Pending home sales jumped by more than five percent in March and another 10 percent in April, according to the National Association of Realtors. That’s 21 percent higher than the previous year for the same months.

New applications for loans to purchase houses took another big jump — up 13 percent over the previous week, according to the Mortgage Bankers Association. MBA vice president for research, Michael Fratantoni, said that last week’s FHA and VA share of home purchase applications soared above 50 percent — the highest it’s been in more than two decades.

The U.S. economy is likely to recover more quickly after this recession than it did after the previous two recessions, predicts researchers for the Federal Reserve Bank of San Francisco.

“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)

Great analysis, provided by our  good  friend and economic advisor for the  Placerville, California area;  Steve Cockerell, President of Western Foothill Mortgage, Inc.

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! 

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

Three to four years ago when home prices were at their peak, there were people who wished they could have gone back in time to buy a house before prices went though the stratosphere.  At the same time, there were other people that decided to wait for prices to come down before buying a house. For both sets of people, it would appear that the time has come. Today prices have come down to the 2002 levels, so for the people that wanted to go back in time, here is your chance to go back to 2002. Now for the people who said they wanted to wait until prices come down, now is the time, because prices are at historic lows after being at historic highs. 
To keep things real, you’re going to have both sets of groups that will find fault with this line of reasoning. The ones who wanted to go back in time to 2000, (Home values doubled in many areas from 2000 to 2006.), its just not far back enough for them. They want the magic time machine to go back further to maybe, what like 1985? (The problem is, the 1980s experienced interest rates going up to 20% on home loans.)
For the people who were waiting for prices to come down until they bought, they want to see prices come down even lower! Say another 50%?
The old adage applies; “you can please some of the people some of the time, but you can’t please all of the people all of the time.” It would seem that the procrastinators waiting to buy a home will be saying the same thing when prices rise and they miss the boat, “again.”
Now out of those two groups, the ones that have a better chance to have their wish come true might be the ones looking for prices to come down, although it’s very doubtful they will see another 50% drop in value. They might see another 15-20%, but interest rates could increase, and decrease buying power.
With the vast changes to the real estate industry and the government’s involvement along with ever greater influences the Internet is having, it’s hard to see what the future holds.
But, looking back on the real estate industry over the past 60 years, appreciation has occurred. So if you’re in one of the groups of people that really wants to buy a home, now would be a good time to get an idea of what you can afford to buy and find a Real Estate agent to help you find a house that will fit your needs.

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With a boost from the first-time homebuyer tax credit, the housing market may be headed for a sustainable recovery beginning in 2010, according to NAR’s latest forecast. NAR projects existing-home sales to be 5.01 million in 2009, up 2.0 percent from a year ago, before rising 13.6 percent to 5.69 million in 2010. New-home sales are also expected to rebound, rising from 397,000 in 2009 to 549,000 next year. First-time buyers are leading the recovery, accounting for 47 percent of all home sales over the past year, up from 41 percent from a year ago.

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.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. For additional information about the Deed for Lease Program, including full details on program eligibility, please review the Guide Announcement on www.efanniemae.com.

Sounds like an admirable and helpful concept for many families facing foreclosure. However, if the feds are becoming a “National Landlord”, will their next step be renting all the vacant homes they own from foreclosures? That competition with the private sector of landlords and investors who own rental properties would be an interesting dilemma! 

 Freddie Mac released the results of its Primary Mortgage Market Survey® in which the 30-year fixed-rate mortgage averaged 4.98 percent with an average 0.7 point for the week ending November 5, 2009, down from the previous week when it averaged 5.03 percent. Last year at this time, the 30-year FRM averaged 6.20 percent.

“Mortgage rates fell back this week pulling interest rates on 30-year fixed mortgages under 5 percent,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Lower mortgage rates should help homeowners lower their monthly payments and feed the ongoing recovery in the housing market.” For instance, the Federal Housing Finance Agency reported that Freddie Mac and Fannie Mae have financed more than 3.5 million refinance loans during the first nine months of 2009. Freddie Mac estimates that borrowers who refinanced their conventional loan during the third quarter reduced their interest rate by a median of 1.1 percentage points, which will save these borrowers an aggregate of $3 billion in mortgage payments over the next 12 months.

Historic Placerville’s gold country now offers a multitude of colors. Trees, shrubs and native brush come alive with fall’s vivid palette. Highway 50 from Shingle Springs through Placerville to Camino is an excellent tour base, offering numerous side loops and historic sites.
 
 “Apple Hill” orchards, farms, ranches and their restaurants welcome visitors with bakeries and fall harvest treats. Trips can vary from short jaunts to day-long tours from Placerville to the Camino areas north of Highway 50. Gold Bug Mine and the many shops on the Main Street of Placerville offer other attractions. It’s also worthwhile to just drive through the scenic side roads going one way, then back another.
 
Maps and other tourist information are available on web sites or contact us for any questions or assistance. We’ve served the “Mother Lode Country” for over 45 years with all types of real estate services.

Feds Treasury Department announced today, government will buy securities issued by Fannie Mae and Freddie Mac backed by new loan revenue bonds. These would be issued by state and local housing finance agencies. The initiative includes a second component in which Fannie and Freddie will assist state and local agencies to refinance existing bonds to lower their cost. 

California Housing Finance Agencies acting executive director,  Steve Spears, said the initiative will “help revive CalHFA lending programs and give California first-time home buyers a chance to take advantage of the highest affordability levels that have been seen in almost two decades.” 

So is this an indication the current $8,000. credit for first-time home buyers is not going to be extended? Why is the “Housing and Economic Recovery Act” passed last year seemingly only going to first-time buyers?