Daily Real Estate News November 8, 2010
Home Sales Could Enter 'Virtuous Cycle'
Consumer confidence and business spending are key to whether the U.S. housing market will move into a virtuous or a vicious cycle in 2011, NAR Chief Economist Lawrence Yun told a packed audience at the Residential Economic Outlook Forum Friday in New Orleans.
After the downturn, the housing market has clawed its way back to a point of near stability, Yun said, with the pace of new foreclosures easing, sales moving toward historically normal levels and prices on a national basis gaining modestly.
At the same time, affordability remains strong. He said all of the price excesses from the housing bubble have been squeezed out. In San Diego, for example, buyers today would pay $1,564 a month in mortgage payments for a house that at the height of the boom would have cost them $2,833 a month.
The broader economy is also showing positive signs, with businesses enjoying strong profits, sitting on huge cash reserves, and even adding jobs. Yun predicts this positive trend to continue into 2011, with existing home sales reaching 5.5 million units, prices rising a modest 1 percent, and the U.S. gross domestic product increasing to about 2.5 percent.
“We are entering a virtuous cycle,” he said. But for the positive trend to continue, he added, businesses will have to start spending some of their cash to fuel job growth at a far greater pace than they’re doing now. Currently, businesses are adding jobs at a pace of about 100,000 a month. That needs to grow to about 400,000 a month for unemployment to start shrinking.
The scenario will be far more negative if businesses continue to sit on their cash. In that case, sales will fall, inventories will rise, the high rate of foreclosures will resume, and the cost to the federal government of bailing out Fannie Mae and Freddie Mac will surge.
Federal Reserve Governor Thomas Koenig, who shared the data with Yun, said the Fed’s continued effort to spur the economy, most recently through a $600 billion bond buying program, is understandable given concerns over the slow pace of growth. But the continued subsidization of the market could unleash inflationary forces.
Yun said he sees possible evidence of inflation building, but it’s not visible now because the housing-cost portion of inflation measurements is holding down prices.
—Rob Freedman, REALTOR® Magazine
Monday, November 08, 2010
Saturday, October 23, 2010
MORTGAGE RATES EDGE UP
From RealtorMag - Daily Real Estate News October 22, 2010
Mortgage Rates Edge Up
Interest on the 30-year fixed mortgage averaged 4.21 percent this week, up from a record low of 4.19 percent a week ago, reports Freddie Mac.
Rates for 15-year fixed loans also rose, climbing to 3.64 percent from 3.62 percent. However, the five-year adjustable-rate mortgage fell to a record low of 3.45 percent, after averaging 3.47 percent the previous week.
Source: Columbus (Ohio) Dispatch (10/22/10)
Mortgage Rates Edge Up
Interest on the 30-year fixed mortgage averaged 4.21 percent this week, up from a record low of 4.19 percent a week ago, reports Freddie Mac.
Rates for 15-year fixed loans also rose, climbing to 3.64 percent from 3.62 percent. However, the five-year adjustable-rate mortgage fell to a record low of 3.45 percent, after averaging 3.47 percent the previous week.
Source: Columbus (Ohio) Dispatch (10/22/10)
Friday, October 22, 2010
Fed Beige Book Shows Modest Growth but Weak Real Estate Conditions
Fed Beige Book Shows Modest Growth but Weak Real Estate Conditions
10/21/2010 By: Carrie Bay DSNEWS
The Federal Reserve’s popular Beige Book report released this week suggests economic activity across most of the nation is showing signs of “modest” growth, but it’s not enough to improve the country’s anemic jobs picture with the unemployment rate holding at or above 9.5 percent for more than a year.
Beige Book findings are based on anecdotal information collected across the country from businesses and contacts outside the Federal Reserve. Data included in the latest report covers the September to early October time period.
Seven of the Fed’s 12 districts reported “moderate improvements” in economic activity. Three regions — Philadelphia, Richmond, and Cleveland – characterized economic development as “mixed” or “steady,” while only two regions — Dallas and Atlanta – described activity as “subdued.”
The most recent results show progress, albeit uneven, compared to the Fed’s description of “widespread deceleration” in the September Beige Book.
Housing markets remained weak with most districts reporting sales below year-ago levels. The central bank says input it received on home prices, however, suggests stability. Conditions in the commercial real estate sector were soft, while overall lending activity was described as stable in most districts.
Overall home sales were characterized as “sluggish” or “declining” throughout most regional districts. There were scattered reports of some improvement in sales in a few districts, however.
Philadelphia noted an increase in sales of existing homes, and Richmond, Kansas City, and Dallas reported upticks in sales of higher-priced homes. Sales reports were mixed in the St. Louis and Minneapolis districts, with increases in some metro areas and declines in others. Home inventories were elevated or rising according to most district reports.
The central bank says home prices were generally stable since last month’s Beige Book release, although Kansas City noted a decrease in prices, and New York and Minneapolis reported declines in some metros. Homebuilders in the Atlanta district reported downward price pressure and expressed concern about rising foreclosures and bank-owned properties coming to market.
Conditions in the commercial real estate sector “remained subdued,” according to Fed officials. Reports suggested rental rates continued to decline for most commercial property types. The one exception was the apartment sector, where higher leasing activity led to fewer concessions, most notably in Manhattan. Office, industrial and retail rental markets remained weak, although there were a few reports of slight increases in leasing activity in the Richmond, Chicago, and Dallas districts.
Commercial property sales were low overall, but contacts in Chicago and Dallas said investment demand for distressed commercial properties remained strong. Contacts within the real estate industry appear to believe the commercial real estate and construction sectors will remain weak for some time, according to Beige Book commentary.
Overall lending activity was at low levels across most districts, but that’s consistent with conditions over the past many months and characterized as “stable” by the central bank.
On the consumer side, lending was sluggish, but there were scattered reports of improvement. Residential mortgage lending and refinancing activity increased in several districts, and San Francisco reported an increase in demand for nonconforming mortgage loans.
Credit quality changed little on balance. New York reported a decrease in delinquency rates on consumer loans, however, and overall quality improved in Philadelphia and Richmond.
10/21/2010 By: Carrie Bay DSNEWS
The Federal Reserve’s popular Beige Book report released this week suggests economic activity across most of the nation is showing signs of “modest” growth, but it’s not enough to improve the country’s anemic jobs picture with the unemployment rate holding at or above 9.5 percent for more than a year.
Beige Book findings are based on anecdotal information collected across the country from businesses and contacts outside the Federal Reserve. Data included in the latest report covers the September to early October time period.
Seven of the Fed’s 12 districts reported “moderate improvements” in economic activity. Three regions — Philadelphia, Richmond, and Cleveland – characterized economic development as “mixed” or “steady,” while only two regions — Dallas and Atlanta – described activity as “subdued.”
The most recent results show progress, albeit uneven, compared to the Fed’s description of “widespread deceleration” in the September Beige Book.
Housing markets remained weak with most districts reporting sales below year-ago levels. The central bank says input it received on home prices, however, suggests stability. Conditions in the commercial real estate sector were soft, while overall lending activity was described as stable in most districts.
Overall home sales were characterized as “sluggish” or “declining” throughout most regional districts. There were scattered reports of some improvement in sales in a few districts, however.
Philadelphia noted an increase in sales of existing homes, and Richmond, Kansas City, and Dallas reported upticks in sales of higher-priced homes. Sales reports were mixed in the St. Louis and Minneapolis districts, with increases in some metro areas and declines in others. Home inventories were elevated or rising according to most district reports.
The central bank says home prices were generally stable since last month’s Beige Book release, although Kansas City noted a decrease in prices, and New York and Minneapolis reported declines in some metros. Homebuilders in the Atlanta district reported downward price pressure and expressed concern about rising foreclosures and bank-owned properties coming to market.
Conditions in the commercial real estate sector “remained subdued,” according to Fed officials. Reports suggested rental rates continued to decline for most commercial property types. The one exception was the apartment sector, where higher leasing activity led to fewer concessions, most notably in Manhattan. Office, industrial and retail rental markets remained weak, although there were a few reports of slight increases in leasing activity in the Richmond, Chicago, and Dallas districts.
Commercial property sales were low overall, but contacts in Chicago and Dallas said investment demand for distressed commercial properties remained strong. Contacts within the real estate industry appear to believe the commercial real estate and construction sectors will remain weak for some time, according to Beige Book commentary.
Overall lending activity was at low levels across most districts, but that’s consistent with conditions over the past many months and characterized as “stable” by the central bank.
On the consumer side, lending was sluggish, but there were scattered reports of improvement. Residential mortgage lending and refinancing activity increased in several districts, and San Francisco reported an increase in demand for nonconforming mortgage loans.
Credit quality changed little on balance. New York reported a decrease in delinquency rates on consumer loans, however, and overall quality improved in Philadelphia and Richmond.
Wednesday, October 20, 2010
China's Surprise Rate Hike: What It Means
China's Surprise Rate Hike: What It Means
by Daniel Gross, Yahoo! Finance Tuesday, October 19, 2010
Mike Santoli, columnist at Barron's, talks to Daniel Gross and Aaron Task about China's rate hike.
On Tuesday global stock markets got up on the wrong side of the bed thanks to news from an unexpected source: the People's Bank of China. The nation's central bank, analogous to the Federal Reserve in the U.S., announced it would raise rates on one-year loans and deposits by .25 percent, or 25 basis points.
Why is the People's Bank of China raising interest rates?
Central banks raise interest rates when they are concerned about inflation, or if they are worried that credit or the economy at large is expanding at an unsustainable pace. Higher interest rates make money more expensive, and thus should cut down on borrowing activity. China's economy is growing very rapidly, at a 10.3 percent annual rate in the most recent quarter, and inflation is running above the official target of three percent. For a country that has to make up as much ground as China does, no rate can be too fast. But housing markets, especially in coastal cities, have been raging. With observers fretting about bubbles, China's central bank has taken efforts to discourage real estate lending and choke off inflation. Raising interest rates is one way to do that.
Why would global stock markets react negatively to this news?
Two reasons. First, think about the changing shape of the world's economic geography. The U.S. (the world's largest economy), Japan (until recently the world's second-largest economy), and the European bloc (which rivals the U.S. in size) are all growing very slowly. China, now the second-largest economy in the world, accounts for a huge amount of growth and demand. While it exports a great deal, it also imports massive quantities of everything from nuts grown in California to copper mined in Chile. The Chinese domestic market has also finally emerged as an important source of sales; General Motors sells more cars in China than it does in the U.S. So any hint that the Chinese juggernaut might be showing signs of slowing is bound to be seen in a negative light by investors who are concerned about growth.
Second, it was a surprise. Markets hate surprises. As a general rule, monetary policy in the U.S. and Europe is conducted with a certain amount of transparency. Officials use speeches and statements to telegraph their intentions, so as not to surprise investors and markets. In China, government bodies keep information very close to their vest and don't face the same type of pressures that western central banks do to give notice about their actions. Since the markets for Chinese currency are very tightly controlled, the People's Bank of China doesn't feel the need to communicate openly about its intentions.
What are the effects of such an increase on China's economy?
The impact of this rate increase lies as much in its symbolism as in its practical effect. Boosting the rates by 25 basis points is like tapping the brakes gently on a freight train running at 90 miles per hour -- it can only slow it down a bit. But it does signal that China's central bank is sufficiently concerned about some issues in its economy to take action.
The exchange rate of China's currency, the yuan (the Renminbi is the official name of the currency, while the yuan is the main unit of currency), against the dollar, has been a contentious issue between the U.S. and China. How does this move affect the exchange rate?
In theory, raising interest rates in China should make the yuan stronger against the dollar. All things being equal, money flows toward countries with higher interest rates (like China) and away from countries with very low interest rates (like the U.S.). But despite intense pressure from the U.S. government, China has remained committed to keeping the yuan trading in a stable range against the greenback. China prefers a weak currency because it makes Chinese goods cheap for American consumers and makes American-made goods expensive for Chinese consumers -- which encourages exports and the consumption of domestically produced goods.
Daniel Gross is economics editor and columnist at Yahoo! Finance.
by Daniel Gross, Yahoo! Finance Tuesday, October 19, 2010
Mike Santoli, columnist at Barron's, talks to Daniel Gross and Aaron Task about China's rate hike.
On Tuesday global stock markets got up on the wrong side of the bed thanks to news from an unexpected source: the People's Bank of China. The nation's central bank, analogous to the Federal Reserve in the U.S., announced it would raise rates on one-year loans and deposits by .25 percent, or 25 basis points.
Why is the People's Bank of China raising interest rates?
Central banks raise interest rates when they are concerned about inflation, or if they are worried that credit or the economy at large is expanding at an unsustainable pace. Higher interest rates make money more expensive, and thus should cut down on borrowing activity. China's economy is growing very rapidly, at a 10.3 percent annual rate in the most recent quarter, and inflation is running above the official target of three percent. For a country that has to make up as much ground as China does, no rate can be too fast. But housing markets, especially in coastal cities, have been raging. With observers fretting about bubbles, China's central bank has taken efforts to discourage real estate lending and choke off inflation. Raising interest rates is one way to do that.
Why would global stock markets react negatively to this news?
Two reasons. First, think about the changing shape of the world's economic geography. The U.S. (the world's largest economy), Japan (until recently the world's second-largest economy), and the European bloc (which rivals the U.S. in size) are all growing very slowly. China, now the second-largest economy in the world, accounts for a huge amount of growth and demand. While it exports a great deal, it also imports massive quantities of everything from nuts grown in California to copper mined in Chile. The Chinese domestic market has also finally emerged as an important source of sales; General Motors sells more cars in China than it does in the U.S. So any hint that the Chinese juggernaut might be showing signs of slowing is bound to be seen in a negative light by investors who are concerned about growth.
Second, it was a surprise. Markets hate surprises. As a general rule, monetary policy in the U.S. and Europe is conducted with a certain amount of transparency. Officials use speeches and statements to telegraph their intentions, so as not to surprise investors and markets. In China, government bodies keep information very close to their vest and don't face the same type of pressures that western central banks do to give notice about their actions. Since the markets for Chinese currency are very tightly controlled, the People's Bank of China doesn't feel the need to communicate openly about its intentions.
What are the effects of such an increase on China's economy?
The impact of this rate increase lies as much in its symbolism as in its practical effect. Boosting the rates by 25 basis points is like tapping the brakes gently on a freight train running at 90 miles per hour -- it can only slow it down a bit. But it does signal that China's central bank is sufficiently concerned about some issues in its economy to take action.
The exchange rate of China's currency, the yuan (the Renminbi is the official name of the currency, while the yuan is the main unit of currency), against the dollar, has been a contentious issue between the U.S. and China. How does this move affect the exchange rate?
In theory, raising interest rates in China should make the yuan stronger against the dollar. All things being equal, money flows toward countries with higher interest rates (like China) and away from countries with very low interest rates (like the U.S.). But despite intense pressure from the U.S. government, China has remained committed to keeping the yuan trading in a stable range against the greenback. China prefers a weak currency because it makes Chinese goods cheap for American consumers and makes American-made goods expensive for Chinese consumers -- which encourages exports and the consumption of domestically produced goods.
Daniel Gross is economics editor and columnist at Yahoo! Finance.
Wednesday, May 05, 2010
CARHOF Offers Grants for Workforce Housing - Colorado Applications Submission date is August 2, 2010
Please call for additional details - Marie, 720-275-3926
Colorado Department of Local Affairs
Division of Housing
Tuesday, March 2, 2010
CARHOF Offers Grants for Workforce Housing
CARHOF (Colorado Association of REALTORS® Housing Opportunity Foundation) is sponsoring a Workforce Housing Initiative and is making available $100,000 in grants. Nonprofit and employer housing programs that support workforce housing by offering down payment assistance to help workers purchase homes in their communities can apply.
CARHOF has instituted some guidelines that will help sustain the workforce housing program. Grant recipients must demonstrate an on-going financial and operational capacity to continue the program. The down payment assistance, which is given as a loan to buyers, must comply with all state and federal regulations and be reasonable with the conditions of the market.
For consumers to be eligible for the loans, they must be employed a minimum of 30 hours per week in their community and they must complete a HUD or CHFA certified home buyer counseling program. The loan will be repaid and the monies will be used to help future workers purchase a home.
The funding for this initiative came from National Association of REALTORS® Ira Gribin Workforce Housing fund to assist a broader range of working people including, retail sales workers, restaurant workers, technicians, office workers, etc., in addition to occupations that provide the bulk of vital services.
Nonprofit housing agencies and employers can apply for these funds by submitting a proposal directly to CARHOF at 309 Inverness Way South, Englewood, CO 80112. Applications must be received by 5:00 p.m. on Monday, August 2, 2010 to be considered. The application and guidelines can be found at www.CARHOF.org.
Colorado Department of Local Affairs
Division of Housing
Tuesday, March 2, 2010
CARHOF Offers Grants for Workforce Housing
CARHOF (Colorado Association of REALTORS® Housing Opportunity Foundation) is sponsoring a Workforce Housing Initiative and is making available $100,000 in grants. Nonprofit and employer housing programs that support workforce housing by offering down payment assistance to help workers purchase homes in their communities can apply.
CARHOF has instituted some guidelines that will help sustain the workforce housing program. Grant recipients must demonstrate an on-going financial and operational capacity to continue the program. The down payment assistance, which is given as a loan to buyers, must comply with all state and federal regulations and be reasonable with the conditions of the market.
For consumers to be eligible for the loans, they must be employed a minimum of 30 hours per week in their community and they must complete a HUD or CHFA certified home buyer counseling program. The loan will be repaid and the monies will be used to help future workers purchase a home.
The funding for this initiative came from National Association of REALTORS® Ira Gribin Workforce Housing fund to assist a broader range of working people including, retail sales workers, restaurant workers, technicians, office workers, etc., in addition to occupations that provide the bulk of vital services.
Nonprofit housing agencies and employers can apply for these funds by submitting a proposal directly to CARHOF at 309 Inverness Way South, Englewood, CO 80112. Applications must be received by 5:00 p.m. on Monday, August 2, 2010 to be considered. The application and guidelines can be found at www.CARHOF.org.
NAR Grants Give Working Families a Boost
Daily Real Estate News
May 5, 2010
Share
NAR Grants Give Working Families a Boost
Despite today’s tight economy, many areas of the country have not seen a significant drop in their high cost of living.
To help meet this critical need for more affordable housing for low- to moderate-income working families, the NATIONAL ASSOCIATION OF REALTOR® has awarded more than $3.4 million through the Ira Gribin Workforce Housing Grants program.
Teachers, firefighters, police officers, and restaurant, and retail workers provide vital community services. However, they often cannot afford to live in the communities where they work. This segment of the population can be shut out of the local housing market in high-cost communities, which can lead to longer commutes, sprawl, and traffic congestion.
Ira Gribin Workforce Housing Grants are awarded to state and regional REALTOR® associations to help fund programs that promote safe, decent housing for people with low and moderate incomes. Established in 2009, the program is named in honor of Ira Gribin, a former NAR president who was a tireless advocate for fair and affordable housing for diverse populations.
“REALTORS® build communities and care about the high cost of housing and the lack of affordable, decent homes available to working families in many of our communities,” said NAR President Vicki Cox Golder. “REALTOR® associations are working hard to address affordability problems in their states, and through the Ira Gribin Workforce Housing Grants program, they are able to provide even more affordable housing opportunities to working families. That’s good for the entire community."
Grants can be used to support a broad range of workforce housing solutions, including downpayment and financial assistance programs, home buyer or REALTOR® education, public awareness and advocacy campaigns, and housing construction and rehabilitation. The one-time grants are awarded on a sliding scale based on REALTOR® association membership. To date, NAR has awarded grants to 31 REALTOR® associations, totaling just over $3.4 million.
The following state REALTOR® associations or their foundations have been awarded an Ira Gribin Workforce Housing Grant since the program’s inception: Arizona, California, Colorado, Delaware, Florida, Hawaii, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin.
A new NAR report, “Tackling Workforce Housing State by State,” describes the status and progress of the 2009 Ira Gribin Workforce Housing Grant recipients. The report provides detailed program summaries and contact information for each of the grantees and is available at www.realtor.org/iragribingrant.
“The ‘Tackling Workforce Housing State by State’ report is a great resource for REALTORS® or community organizations who are looking for a guide or need inspiration to handle workforce housing issues in their own community,” said Cox Golder.
— NAR
May 5, 2010
Share
NAR Grants Give Working Families a Boost
Despite today’s tight economy, many areas of the country have not seen a significant drop in their high cost of living.
To help meet this critical need for more affordable housing for low- to moderate-income working families, the NATIONAL ASSOCIATION OF REALTOR® has awarded more than $3.4 million through the Ira Gribin Workforce Housing Grants program.
Teachers, firefighters, police officers, and restaurant, and retail workers provide vital community services. However, they often cannot afford to live in the communities where they work. This segment of the population can be shut out of the local housing market in high-cost communities, which can lead to longer commutes, sprawl, and traffic congestion.
Ira Gribin Workforce Housing Grants are awarded to state and regional REALTOR® associations to help fund programs that promote safe, decent housing for people with low and moderate incomes. Established in 2009, the program is named in honor of Ira Gribin, a former NAR president who was a tireless advocate for fair and affordable housing for diverse populations.
“REALTORS® build communities and care about the high cost of housing and the lack of affordable, decent homes available to working families in many of our communities,” said NAR President Vicki Cox Golder. “REALTOR® associations are working hard to address affordability problems in their states, and through the Ira Gribin Workforce Housing Grants program, they are able to provide even more affordable housing opportunities to working families. That’s good for the entire community."
Grants can be used to support a broad range of workforce housing solutions, including downpayment and financial assistance programs, home buyer or REALTOR® education, public awareness and advocacy campaigns, and housing construction and rehabilitation. The one-time grants are awarded on a sliding scale based on REALTOR® association membership. To date, NAR has awarded grants to 31 REALTOR® associations, totaling just over $3.4 million.
The following state REALTOR® associations or their foundations have been awarded an Ira Gribin Workforce Housing Grant since the program’s inception: Arizona, California, Colorado, Delaware, Florida, Hawaii, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin.
A new NAR report, “Tackling Workforce Housing State by State,” describes the status and progress of the 2009 Ira Gribin Workforce Housing Grant recipients. The report provides detailed program summaries and contact information for each of the grantees and is available at www.realtor.org/iragribingrant.
“The ‘Tackling Workforce Housing State by State’ report is a great resource for REALTORS® or community organizations who are looking for a guide or need inspiration to handle workforce housing issues in their own community,” said Cox Golder.
— NAR
Friday, April 30, 2010
Denver-area homebuyers hurry as tax credit expires
Deadline Day: A Survey of Data and Opinion on How the Tax Credit Has Impacted the Market
Denver-area homebuyers hurry as tax credit expires
Denver Business Journal
Read more: Denver-area homebuyers hurry as tax credit expires - Denver Business Journal:
Expiring federal homebuyer tax credits helped propel Denver-area home resales, of both houses and condos, in March from February and year over year, according to Metrolist Inc. data released Thursday.
Total resales rose 12.35 percent to 3,602 year over year, and jumped 47.87 percent from February sales.
Average sold price for both types of housing last month increased 7.10 percent to $248,905 from the same month of 2009 and was basically flat from February.
Resales, also called existing-home sales, are those of homes that have already been sold at least once before.
“First-time homebuyers will be out in force in the next 30 days, even though inventory will increase,” Gary Bauer, an independent Littleton residential real estate broker, said in a statement. “[Move-up] buyers will remain limited.”
Those credits include the $8,000 first-time homebuyer credit and the $6,500 credit for existing homeowners who want to buy a different home. The first-time homebuyer tax credit was extended last fall, at the same time the existing-homeowner credit was added, but real estate brokers don’t expect either credit to be extended this year.
“Hundreds of homebuyers in Colorado are still rushing to beat the April 30 deadline for the homebuyer tax credit,” David Simonson of Re/Max Professionals Inc. said in a report released Thursday. “If they’re successful, we could see some big sales numbers in next month’s report.”
Among the neighborhoods attracting the highest average selling prices for houses alone were Boulder ($611,479), metro Denver’s southeastern suburbs (476,312), Louisville (443,259) and southeastern Denver ($421,671).
Most existing houses sold — 32 percent — were in the $100,000-$200,000 price range, followed by the $200,000-$300,000 range with 31 percent of sales.
Other significant Denver-area statistics from Metrolist’s March report:
• Sales of houses rose 8.15 percent to 2,801 in March year over year, and were up 45.42 percent from February.
• Average selling price for houses increased 9.29 percent to $274,950 year over year, and rose 1.95 percent from February.
Median selling price went up 12.28 percent to $229,000 from March ’09, and 3.74 percent from February.
• Average days on the market for houses dropped nearly 19 percent to 86 year over year, and were down 6.5 percent from February.
• Condo sales rose 30 percent to 801 from the prior-year March, and jumped 53.15 percent from February.
• Average selling price for condos increased 4 percent to $157,830 year over year, but dipped 5 percent from February. Median selling price was up 2.4 percent to $131,579 from March of last year, and basically flat compared to February.
• Most condos sold — 47 percent — were in the $100,000-$200,000 price range.
• Days on market for condos also dropped — 16 percent to 89 year over year, and nearly 18 percent from February.
Metrolist, based in Greenwood Village, is metro Denver’s Multiple Listing Service, providing sales information to real estate professionals.
— Compiled by the DBJ’s Paula Moore:
Denver-area homebuyers hurry as tax credit expires
Denver Business Journal
Read more: Denver-area homebuyers hurry as tax credit expires - Denver Business Journal:
Expiring federal homebuyer tax credits helped propel Denver-area home resales, of both houses and condos, in March from February and year over year, according to Metrolist Inc. data released Thursday.
Total resales rose 12.35 percent to 3,602 year over year, and jumped 47.87 percent from February sales.
Average sold price for both types of housing last month increased 7.10 percent to $248,905 from the same month of 2009 and was basically flat from February.
Resales, also called existing-home sales, are those of homes that have already been sold at least once before.
“First-time homebuyers will be out in force in the next 30 days, even though inventory will increase,” Gary Bauer, an independent Littleton residential real estate broker, said in a statement. “[Move-up] buyers will remain limited.”
Those credits include the $8,000 first-time homebuyer credit and the $6,500 credit for existing homeowners who want to buy a different home. The first-time homebuyer tax credit was extended last fall, at the same time the existing-homeowner credit was added, but real estate brokers don’t expect either credit to be extended this year.
“Hundreds of homebuyers in Colorado are still rushing to beat the April 30 deadline for the homebuyer tax credit,” David Simonson of Re/Max Professionals Inc. said in a report released Thursday. “If they’re successful, we could see some big sales numbers in next month’s report.”
Among the neighborhoods attracting the highest average selling prices for houses alone were Boulder ($611,479), metro Denver’s southeastern suburbs (476,312), Louisville (443,259) and southeastern Denver ($421,671).
Most existing houses sold — 32 percent — were in the $100,000-$200,000 price range, followed by the $200,000-$300,000 range with 31 percent of sales.
Other significant Denver-area statistics from Metrolist’s March report:
• Sales of houses rose 8.15 percent to 2,801 in March year over year, and were up 45.42 percent from February.
• Average selling price for houses increased 9.29 percent to $274,950 year over year, and rose 1.95 percent from February.
Median selling price went up 12.28 percent to $229,000 from March ’09, and 3.74 percent from February.
• Average days on the market for houses dropped nearly 19 percent to 86 year over year, and were down 6.5 percent from February.
• Condo sales rose 30 percent to 801 from the prior-year March, and jumped 53.15 percent from February.
• Average selling price for condos increased 4 percent to $157,830 year over year, but dipped 5 percent from February. Median selling price was up 2.4 percent to $131,579 from March of last year, and basically flat compared to February.
• Most condos sold — 47 percent — were in the $100,000-$200,000 price range.
• Days on market for condos also dropped — 16 percent to 89 year over year, and nearly 18 percent from February.
Metrolist, based in Greenwood Village, is metro Denver’s Multiple Listing Service, providing sales information to real estate professionals.
— Compiled by the DBJ’s Paula Moore:
New Home Sales Jump in March
Deadline Day: A Survey of Data and Opinion on How the Tax Credit Has Impacted the Market
New Home Sales Jump in March
Sales of new homes rose 27 percent in March compared to February, the U.S. Commerce Department announced Friday. It was the largest monthly increase since April 1963, when sales jumped 31.2 percent.
In addition, the National Association of REALTORS® reported last week that sales of previously owned homes rose 6.8 percent.
Economists attribute the figures to buyers taking advantage of the $8,000 tax credit scheduled to expire at the end of this month.
“In simple terms, housing is a bargain again, and buyers are responding,” Michael D. Larson, a real estate and interest rate analyst at Weiss Research, wrote in a research note. “That is unambiguously good news for the market going forward.”
Source: The New York Times, Christine Hauser (04/23/2010)
New Home Sales Jump in March
Sales of new homes rose 27 percent in March compared to February, the U.S. Commerce Department announced Friday. It was the largest monthly increase since April 1963, when sales jumped 31.2 percent.
In addition, the National Association of REALTORS® reported last week that sales of previously owned homes rose 6.8 percent.
Economists attribute the figures to buyers taking advantage of the $8,000 tax credit scheduled to expire at the end of this month.
“In simple terms, housing is a bargain again, and buyers are responding,” Michael D. Larson, a real estate and interest rate analyst at Weiss Research, wrote in a research note. “That is unambiguously good news for the market going forward.”
Source: The New York Times, Christine Hauser (04/23/2010)
Households Unfazed by Expiring Tax Credits
Deadline Day: A Survey of Data and Opinion on How the Tax Credit Has Impacted the Market
Households Unfazed by Expiring Tax Credits
The expiration of the home buyer tax credits won’t deter optimistic households who believe the market is improving, according to a survey released Wednesday by Prudential Real Estate and Relocation Services.
More than 90 percent of those surveyed believe the home buyer tax credits have helped both first-time buyers and the overall housing market, but 65 percent say that end of tax credits won’t reduce their personal interest in buying a home.
Over the next five years, 79 percent expect real estate prices to increase, and 20 percent expect prices to rise substantially. Only 12 percent believe prices will decrease.
Among renters, 75 percent believe owning a home is a better long-term choice for them than renting.
The majority of consumers also believe that homeownership is a good investment, with 75 percent saying it is better than stocks or bonds, 72 percent preferring it to mutual funds, and 74 percent saying it surpasses savings accounts.
Source: Prudential Real Estate and Relocation Services, Inc. (04/28/2010)
Households Unfazed by Expiring Tax Credits
The expiration of the home buyer tax credits won’t deter optimistic households who believe the market is improving, according to a survey released Wednesday by Prudential Real Estate and Relocation Services.
More than 90 percent of those surveyed believe the home buyer tax credits have helped both first-time buyers and the overall housing market, but 65 percent say that end of tax credits won’t reduce their personal interest in buying a home.
Over the next five years, 79 percent expect real estate prices to increase, and 20 percent expect prices to rise substantially. Only 12 percent believe prices will decrease.
Among renters, 75 percent believe owning a home is a better long-term choice for them than renting.
The majority of consumers also believe that homeownership is a good investment, with 75 percent saying it is better than stocks or bonds, 72 percent preferring it to mutual funds, and 74 percent saying it surpasses savings accounts.
Source: Prudential Real Estate and Relocation Services, Inc. (04/28/2010)
Deadline Day Review of Tax Credit Effect on Markets
Deadline Day: A Survey of Data and Opinion on How the Tax Credit Has Impacted the Market
Buyers Rush to Meet Tax-Credit Deadline
As the federal tax credits come to an end, home buyers everywhere are hurrying to get in under the wire.
But in California the rush has turned into something of a stampede as some would-be buyers try to qualify for both the federal credit and a $10,000 state credit that kicks in Saturday.
As one home shopper tells the Los Angeles Times, "I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now.”
"The stimulus has worked," says Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. "Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up."
Source: Los Angeles Times, Alejandro Lazo (04/30/2010)
Buyers Rush to Meet Tax-Credit Deadline
As the federal tax credits come to an end, home buyers everywhere are hurrying to get in under the wire.
But in California the rush has turned into something of a stampede as some would-be buyers try to qualify for both the federal credit and a $10,000 state credit that kicks in Saturday.
As one home shopper tells the Los Angeles Times, "I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now.”
"The stimulus has worked," says Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. "Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up."
Source: Los Angeles Times, Alejandro Lazo (04/30/2010)
Thursday, February 11, 2010
Real Estate Sales Up Dramatically
Fourth Quarter Home Sales Surge 13.9%
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor.
“The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable.
“Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
Northwest: Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.
“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”
Midwest: In the Midwest, existing-home sales jumped 14.5 percent in the fourth quarter to a pace of 1.38 million and are 29.9 percent above a year ago. The median existing single-family home price in the Midwest rose 1.1 percent to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.
Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
West: Existing-home sales in the West jumped 16.2 percent in the fourth quarter to an annual rate of 1.38 million and are 18.2 percent above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9 percent below the fourth quarter of 2008, but with many areas showing notable gains.
“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Wednesday, February 10, 2010
Four Reasons Sellers Should Jump in the Market Now
4 Reasons to Sell Now
Selling a property in this tough market can seem like a challenge. Here are four factors that actually make this a good time to post a For-Sale sign.
Sell low and buy low. Because all property values are down, the loss on the property a home owner sells is really only a paper loss because the next property he buys also will be a bargain. If he buys smartly, when prices come back up in a few years, he’ll be in better shape.
Down-payment help is widely available. While nothing-down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over the country, but one good way to find them is to search online for “down-payment assistance programs” and the name of your region.
Your uncle has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash.
Good help is available. Really talented real estate practitioners, contractors, and designers are available and eager for business.
Source: McClatchy Tribune, Kate Forgach (02/07/2010)
Selling a property in this tough market can seem like a challenge. Here are four factors that actually make this a good time to post a For-Sale sign.
Sell low and buy low. Because all property values are down, the loss on the property a home owner sells is really only a paper loss because the next property he buys also will be a bargain. If he buys smartly, when prices come back up in a few years, he’ll be in better shape.
Down-payment help is widely available. While nothing-down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over the country, but one good way to find them is to search online for “down-payment assistance programs” and the name of your region.
Your uncle has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash.
Good help is available. Really talented real estate practitioners, contractors, and designers are available and eager for business.
Source: McClatchy Tribune, Kate Forgach (02/07/2010)
Thursday, February 04, 2010
The Urban Land Institute's New Report Overview
From REALTOR online magazine. I'll review the Urban Land Institute's report and post additional details here; investors may be interested in the findings if purchase prices remain as flat as predicted and renting becomes the trend predicted here.
What Will the Market's New Normal Be?
In a new study, "Housing in America: The Next Decade," Urban Land Institute senior resident fellow John McIlwain says the housing market will not return to what it was prior to the downturn but rather that a "new normal" will take its place.
He expects another 10 percent decrease in residential prices this year, a jump in the number of borrowers abandoning "underwater" mortgages, and a change in consumer perceptions of homeownership.
"The emotional impact on the children and parents and disillusion about the 'joys' of homeownership will be intense; new attitudes to homeownership and the American dream will emerge," McIlwain writes.
He expects home price appreciation to hover around 1 percent or 2 percent per year after the market recovers and the national homeownership rate to drop from 67 percent currently to 62 percent by 2020.
In the coming decade, McIlwain expects the following:
What Will the Market's New Normal Be?
In a new study, "Housing in America: The Next Decade," Urban Land Institute senior resident fellow John McIlwain says the housing market will not return to what it was prior to the downturn but rather that a "new normal" will take its place.
He expects another 10 percent decrease in residential prices this year, a jump in the number of borrowers abandoning "underwater" mortgages, and a change in consumer perceptions of homeownership.
"The emotional impact on the children and parents and disillusion about the 'joys' of homeownership will be intense; new attitudes to homeownership and the American dream will emerge," McIlwain writes.
He expects home price appreciation to hover around 1 percent or 2 percent per year after the market recovers and the national homeownership rate to drop from 67 percent currently to 62 percent by 2020.
In the coming decade, McIlwain expects the following:
- Older baby boomers to move to urban, mixed-use, mixed-age centers near family instead of retiring to Sun Belt communities;
- Immigrants to snub the suburbs in favor of more close-knit communities;
- Younger boomers to face the challenges of lost home equity and a smaller pool of move-up buyers;
- Generation Y to rent for long periods by choice or because they are paying off student loans or have stagnant incomes.
Wednesday, February 03, 2010
What Will Happen When the US Stops Buying Mortgage-Backed Securities? Part 2
This piece is from Reuters and has a different view on the effect that will occur when the US stops buying Mortgage Backed Securities. It asserts that volatility will again enter the market which will push interest rates up, affecting Buyers and Sellers in a negative way. Marie
Fed's MBS exit could lift Treasury yields
NEW YORK (Reuters) - The end of the Federal Reserve's program to buy mortgages backed by Fannie Mae and Freddie Mac could have a ripple effect on the market for U.S. government bonds.
Once the Fed stops buying mortgage-backed securities at the end of March, private buyers will need to step in and take over in a market that the government has propped up since the financial crisis reached its peak. But they won't want to buy MBS unless the securities offer a better return than the current rate, so mortgage rates will likely rise.
jump in yields would increase the cost of borrowing for the U.S. government. The cost of mortgages would also rise, threatening the fragile housing recovery. And a sharp, sudden spike in Treasury yields could spook regular government debt buyers such as foreign central banks.
Some signs in the marketplace are already pointing to this possibility. The Treasury yield curve has steepened and the prices of bond options have risen.
"Some feel that the recent market moves reflect investor positioning for the end of several unconventional Fed facilities," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co., in an e-mail.
VOLATILITY TO RETURN
Treasury strategists have also warned that wider swings in bond prices lie ahead. They will be driven in part by hedging practices MBS investors are known to use that the Fed, as the largest MBS buyer since the financial crisis began, did not employ.
"In essence, the Fed has taken a lot of volatility out of the marketplace," said William O'Donnell, the head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut. "Any subsequent mortgage issuance is likely to fall into the hands of portfolios likely to be somewhat dynamically more hedged. It'll have the prospect and almost the certainty of adding volatility back into the rates markets."
The practice is known as convexity hedging. Investors holding MBS can actually find themselves losing money if mortgage or interest rates rise suddenly and they cannot get rid of their lower-yielding securities. They often try to offset unexpected increases in mortgage and interest rates by selling Treasury notes.
"If you look at option prices presently, we have the implied volatility for longer-dated options trading 25 percent over their long-term historical levels. One could argue the reason for this is that people anticipate uncertainty after March 31 end date of the Fed's MBS program." said Harley Bassman, a managing director at Bank of America Merrill Lynch.
"People are concerned about what might happen when the Fed starts to drain liquidity. This is why the volatility surface is so steep from one month to two years expiries."
BEWARE OF CONVEXITY
Convexity hedging often feeds on itself, causing Treasury yields to rise even faster.
Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital in New York, said if rates rise sharply, agency MBS could extend and trade to much longer durations.
"It is not a risk for the next 30 basis points or so in interest rates, but at a 4.10 percent (10-year) Treasury yield, the market will start to worry," he said.
Arthur Frank, director and head of MBS research at Deutsche Bank Securities in New York, said while a 4 percent Treasury yield could spark a big pick-up in convexity hedging, he noted that hedging by mortgage servicers, the banks that manage mortgage loans and collect payments from borrowers, is driven more by MBS prices.
"Servicers have varied trigger points, but it is safe to say, they might start selling mortgage duration at 99-1/2 or at 99," he said.
The Fannie Mae 30-year 4.50 percent coupon is priced at 100-8/32, with a yield of 4.438 percent.
The relationship between interest rates and MBS prepayment rates directly influences MBS pricing. More mortgage borrowers are likely to quickly pay off their old loans when interest rates are low and they can get a better deal by refinancing.
In a bond market rally, prepayment rates rise, reducing the price gains of MBS, while in a bear market, prepayment rates slow, resulting in increased price losses. This price movement is commonly referred to as "negative convexity."
(Additional reporting by Jennifer Ablan; Editing by Jan Paschal)
Fed's MBS exit could lift Treasury yields
NEW YORK (Reuters) - The end of the Federal Reserve's program to buy mortgages backed by Fannie Mae and Freddie Mac could have a ripple effect on the market for U.S. government bonds.
Once the Fed stops buying mortgage-backed securities at the end of March, private buyers will need to step in and take over in a market that the government has propped up since the financial crisis reached its peak. But they won't want to buy MBS unless the securities offer a better return than the current rate, so mortgage rates will likely rise.
jump in yields would increase the cost of borrowing for the U.S. government. The cost of mortgages would also rise, threatening the fragile housing recovery. And a sharp, sudden spike in Treasury yields could spook regular government debt buyers such as foreign central banks.
Some signs in the marketplace are already pointing to this possibility. The Treasury yield curve has steepened and the prices of bond options have risen.
"Some feel that the recent market moves reflect investor positioning for the end of several unconventional Fed facilities," said Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co., in an e-mail.
VOLATILITY TO RETURN
Treasury strategists have also warned that wider swings in bond prices lie ahead. They will be driven in part by hedging practices MBS investors are known to use that the Fed, as the largest MBS buyer since the financial crisis began, did not employ.
"In essence, the Fed has taken a lot of volatility out of the marketplace," said William O'Donnell, the head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut. "Any subsequent mortgage issuance is likely to fall into the hands of portfolios likely to be somewhat dynamically more hedged. It'll have the prospect and almost the certainty of adding volatility back into the rates markets."
The practice is known as convexity hedging. Investors holding MBS can actually find themselves losing money if mortgage or interest rates rise suddenly and they cannot get rid of their lower-yielding securities. They often try to offset unexpected increases in mortgage and interest rates by selling Treasury notes.
"If you look at option prices presently, we have the implied volatility for longer-dated options trading 25 percent over their long-term historical levels. One could argue the reason for this is that people anticipate uncertainty after March 31 end date of the Fed's MBS program." said Harley Bassman, a managing director at Bank of America Merrill Lynch.
"People are concerned about what might happen when the Fed starts to drain liquidity. This is why the volatility surface is so steep from one month to two years expiries."
BEWARE OF CONVEXITY
Convexity hedging often feeds on itself, causing Treasury yields to rise even faster.
Ajay Rajadhyaksha, head of U.S. fixed income and securitized products research at Barclays Capital in New York, said if rates rise sharply, agency MBS could extend and trade to much longer durations.
"It is not a risk for the next 30 basis points or so in interest rates, but at a 4.10 percent (10-year) Treasury yield, the market will start to worry," he said.
Arthur Frank, director and head of MBS research at Deutsche Bank Securities in New York, said while a 4 percent Treasury yield could spark a big pick-up in convexity hedging, he noted that hedging by mortgage servicers, the banks that manage mortgage loans and collect payments from borrowers, is driven more by MBS prices.
"Servicers have varied trigger points, but it is safe to say, they might start selling mortgage duration at 99-1/2 or at 99," he said.
The Fannie Mae 30-year 4.50 percent coupon is priced at 100-8/32, with a yield of 4.438 percent.
The relationship between interest rates and MBS prepayment rates directly influences MBS pricing. More mortgage borrowers are likely to quickly pay off their old loans when interest rates are low and they can get a better deal by refinancing.
In a bond market rally, prepayment rates rise, reducing the price gains of MBS, while in a bear market, prepayment rates slow, resulting in increased price losses. This price movement is commonly referred to as "negative convexity."
(Additional reporting by Jennifer Ablan; Editing by Jan Paschal)
Friday, January 29, 2010
What Will Happen When the US Stops Buying Mortgage-Backed Securities?
When the US stops buying mortgage-backed securities it is going to affect Buyers and Sellers; Buyers may find it harder to get lending or it could become much more expensive to borrow, so this will dampen prices and demand, affecting Sellers. Here is an optimistic view of what will happen when the US Treasury purchases slow or stop. For more data on mortgage-backed securities and how they work, do look through the blog. Marie
From WSJ:
JANUARY 28, 2010
Mortgage Bulls Bid Fed Fond Farewell
Say Rates Won't Soar When U.S. Ends Buying Spree
By Mark Gongloff
Conventional wisdom holds that the end of the Federal Reserve's $1.25 trillion mortgage-buying spree will be catastrophic for housing. But a growing number of investors are betting that the fears are overstated and mortgage rates won't soar when the Fed leaves the market in just over two months.
Following a two-day policy meeting, the Fed on Wednesday reiterated its plan to end the program on schedule. The policy makers ignored weak home-sales data that had some observers, worried the market wouldn't be able to wean itself from Fed support, expecting an extension.
Fed officials believe they can pull back successfully. And a growing group of optimists are joining their camp. They argue that investors, searching for higher-yielding securities, will find government-backed mortgage-backed securities a bargain relative to other investments, like corporate debt, that have rallied for much of the past year.
"People will jump in and buy" if there's weakness in the mortgage-backed securities market, said Brian Yelvington, a strategist at fixed-income brokerage Knight Libertas.
The optimistic view hinges on the government remaining an enormous presence in the mortgage market, both through its mortgage-backed securities holdings and the widespread expectation that it could jump back in if the market falters.
If this view is right, then the end of Fed purchases will barely cause a ripple in interest rates on mortgage-backed securities, which move in the opposite direction of price. That, by extension, could mean mortgage rates could stay relatively low, buoying housing.
So far, the numbers support the optimists. In recent weeks, the Fed has slowed its average weekly net purchases of mortgage-backed securities from $21 billion to about $12 billion. Despite this, the "spread" between mortgage-backed securities yields and risk-free Treasury yields is thinner than last September, when the Fed said it was extending its mortgage buying program by a quarter.
This spread is the basis for the rate people pay when they borrow to buy a home. Any widening typically pushes mortgage rates higher by an equal amount almost immediately.
To be sure, mortgage prices could suffer when the Fed stops buying. Pessimists worry spreads could rise a full percentage point, which could take 30-year conforming mortgage rates to 6% from 5%, a potentially crippling blow to a still-shaky housing market.
But spreads mightn't have to widen nearly that much to attract private investors hungry for yield at a time when cash yields nothing.
For one thing, riskier credit investments, such as corporate debt, may have little upside left after rallying furiously for nearly a year. Corporate bonds with an "A" credit rating, for example, yield 160 percentage points over Treasury debt, according to Merrill Lynch indexes. MBS issued by government-backed mortgage agencies, in comparison, yield about 138 percentage points more than Treasurys, according to Kevin Cavin, a mortgage strategist at FTN Financial in Chicago.
Even a small widening of that MBS spread would offer investors a similar spread as risky corporate debt, but this debt would be guaranteed by the U.S. government.
The Fed's purchase program, meanwhile, has likely kept spreads on mortgage-backed securities issued by government-backed mortgage agencies artificially narrow, which has turned off many private investors.
"Our interest in residential mortgage product is next to zero right now," given the low spread over Treasurys, said James Camp, head of fixed income for Eagle Asset Management, a St. Petersburg, Fla. investment firm.
But if mortgage spreads over 10-year Treasurys were to widen by just half a percentage point—taking them back to their long-term average—buying government-backed mortgage securities "starts to make sense again," Mr. Camp said.
A half-point increase in spreads might push mortgage rates up by half a percentage point. But subsequent private buying of mortgages could push spreads and rates right back down again, limiting the damage to the housing market, bulls say.
Large bond mutual-fund managers, such as Pimco, have dialed back on their mortgage investments in the past year and now may be short of their usual allocations to mortgages by up to $350 billion, estimates Ohmsatya Ravi, head of U.S. securitized products research at Nomura Securities International.
Their buying could be enough to replace three or four months' worth of Fed purchases, notes Mr. Ravi, who said he doubts mortgage spreads will widen more than 0.2 percentage point when the Fed stops buying.
Meanwhile, the government will remain an enormous presence in the mortgage market even after the Fed stops buying.
The Fed will have a $1.25 trillion mortgage-backed securities portfolio after March. Unless the Fed sells its securities, its holdings mean a lot of supply is being held off the market, at a time when new mortgage originations are anemic, keeping prices from falling too far.
Meanwhile, the Treasury Department in December said it would provide unlimited support to Fannie Mae and Freddie Mac and wouldn't require the agencies to reduce their $1.5 trillion mortgage holdings, as previously planned, a show of government commitment that has lifted mortgage prices.
Some analysts even suggest that Fannie and Freddie, now with greater government backing, could buy more mortgages if spreads widen drastically and the Fed declines to help. —Jon Hilsenrath contributed to this article.
From WSJ:
JANUARY 28, 2010
Mortgage Bulls Bid Fed Fond Farewell
Say Rates Won't Soar When U.S. Ends Buying Spree
By Mark Gongloff
Conventional wisdom holds that the end of the Federal Reserve's $1.25 trillion mortgage-buying spree will be catastrophic for housing. But a growing number of investors are betting that the fears are overstated and mortgage rates won't soar when the Fed leaves the market in just over two months.
Following a two-day policy meeting, the Fed on Wednesday reiterated its plan to end the program on schedule. The policy makers ignored weak home-sales data that had some observers, worried the market wouldn't be able to wean itself from Fed support, expecting an extension.
Fed officials believe they can pull back successfully. And a growing group of optimists are joining their camp. They argue that investors, searching for higher-yielding securities, will find government-backed mortgage-backed securities a bargain relative to other investments, like corporate debt, that have rallied for much of the past year.
"People will jump in and buy" if there's weakness in the mortgage-backed securities market, said Brian Yelvington, a strategist at fixed-income brokerage Knight Libertas.
The optimistic view hinges on the government remaining an enormous presence in the mortgage market, both through its mortgage-backed securities holdings and the widespread expectation that it could jump back in if the market falters.
If this view is right, then the end of Fed purchases will barely cause a ripple in interest rates on mortgage-backed securities, which move in the opposite direction of price. That, by extension, could mean mortgage rates could stay relatively low, buoying housing.
So far, the numbers support the optimists. In recent weeks, the Fed has slowed its average weekly net purchases of mortgage-backed securities from $21 billion to about $12 billion. Despite this, the "spread" between mortgage-backed securities yields and risk-free Treasury yields is thinner than last September, when the Fed said it was extending its mortgage buying program by a quarter.
This spread is the basis for the rate people pay when they borrow to buy a home. Any widening typically pushes mortgage rates higher by an equal amount almost immediately.
To be sure, mortgage prices could suffer when the Fed stops buying. Pessimists worry spreads could rise a full percentage point, which could take 30-year conforming mortgage rates to 6% from 5%, a potentially crippling blow to a still-shaky housing market.
But spreads mightn't have to widen nearly that much to attract private investors hungry for yield at a time when cash yields nothing.
For one thing, riskier credit investments, such as corporate debt, may have little upside left after rallying furiously for nearly a year. Corporate bonds with an "A" credit rating, for example, yield 160 percentage points over Treasury debt, according to Merrill Lynch indexes. MBS issued by government-backed mortgage agencies, in comparison, yield about 138 percentage points more than Treasurys, according to Kevin Cavin, a mortgage strategist at FTN Financial in Chicago.
Even a small widening of that MBS spread would offer investors a similar spread as risky corporate debt, but this debt would be guaranteed by the U.S. government.
The Fed's purchase program, meanwhile, has likely kept spreads on mortgage-backed securities issued by government-backed mortgage agencies artificially narrow, which has turned off many private investors.
"Our interest in residential mortgage product is next to zero right now," given the low spread over Treasurys, said James Camp, head of fixed income for Eagle Asset Management, a St. Petersburg, Fla. investment firm.
But if mortgage spreads over 10-year Treasurys were to widen by just half a percentage point—taking them back to their long-term average—buying government-backed mortgage securities "starts to make sense again," Mr. Camp said.
A half-point increase in spreads might push mortgage rates up by half a percentage point. But subsequent private buying of mortgages could push spreads and rates right back down again, limiting the damage to the housing market, bulls say.
Large bond mutual-fund managers, such as Pimco, have dialed back on their mortgage investments in the past year and now may be short of their usual allocations to mortgages by up to $350 billion, estimates Ohmsatya Ravi, head of U.S. securitized products research at Nomura Securities International.
Their buying could be enough to replace three or four months' worth of Fed purchases, notes Mr. Ravi, who said he doubts mortgage spreads will widen more than 0.2 percentage point when the Fed stops buying.
Meanwhile, the government will remain an enormous presence in the mortgage market even after the Fed stops buying.
The Fed will have a $1.25 trillion mortgage-backed securities portfolio after March. Unless the Fed sells its securities, its holdings mean a lot of supply is being held off the market, at a time when new mortgage originations are anemic, keeping prices from falling too far.
Meanwhile, the Treasury Department in December said it would provide unlimited support to Fannie Mae and Freddie Mac and wouldn't require the agencies to reduce their $1.5 trillion mortgage holdings, as previously planned, a show of government commitment that has lifted mortgage prices.
Some analysts even suggest that Fannie and Freddie, now with greater government backing, could buy more mortgages if spreads widen drastically and the Fed declines to help. —Jon Hilsenrath contributed to this article.
Tuesday, January 26, 2010
A Primer: Mortgage-Backed Securities
In the next few posts I'll be defining, explaining and telling you how mortgage-backed securities affect lending. The Obama Administration will be pulling back from purchasing these in the next couple months and it's expected to affect lending. This will help you understand beyond the "hype" why now is a great time to find and purchase a home. Marie
Q: What exactly are mortgage backed securities and what companies offer them?
Many of us experienced in the stock market trading or have 401(k)s or private portfolios are familiar with the term "securities." A security is a holder's legal interest in a corporation, certificate, or note that may increase in financial value over time.
Corporate stocks, mutual funds, bonds, certificates of deposit, and notes can be considered securities. The holder of these securities experience can experience gains and losses. Depending on the strength of the security, gains and profits will vary. Gains are evidenced by the growth of a holder's stock portfolio, 401(k), CDs, or bonds. Also, dividend and annuity gains can be paid out as cash profits to the holders.
A mortgage backed security (MBS) is a bond financed by home mortgage payments. This is the essential concept behind the mortgage backed securities definition. The mortgage principal and interest paid by the homeowner is the principal and interest paid to the MBS holder. This is called "mortgage pass-through," which may also differentiate the MBS from other MBS programs that may have other features attached to it.
An investor who buys MBSs provides mortgage loans to the homebuyer (or business) as a consequence. The homeowner or mortgage loan holder controls the "cash flow" that goes to the MBS holder. As mentioned before, the homeowner pays off his mortgage's principal and interest over a designated period of time, i.e., 15, 20, or 30 years. The mortgage loan holder may prepay their entire mortgage at any time, which may upset the timing of the MBS investor's cash flow.
Mortgage prepayments usually occur when a house is sold or the homeowner decides to refinance his home with a second mortgage at a lower rate. This is a risk for the MBS investor.
But mitigating this MBS risk is something called the "option adjusted spread," which means the MBS is tied to government bonds' trade spread.
Other catalysts that spur the prepayment option not tied to interest rates include real estate price inflation, unemployment, economic growth, mortgage risk aversions, and change in borrowing regulations.
Overall, MBSs are an attractive and safe investment vehicle. Good income coupled with capital appreciation and tax-deferred savings are the main advantages to investing in these security or bond types. Like bonds, MBSs trade dynamically with little risk to liquidity. Also, MBSs are likened to treasuries in that they are safe and even offer a higher return of from 1% to 2%.
But, as intimated before, MBS monthly income can vary due to falling interest rates. This fall in interest rates may cause a higher rise in prepayments. As a result this may shorten the term of an MBS, but the investors benefit from the gains anyway.
So, you appear interested. What companies offer mortgage backed securities? Companies that offer MBSs include the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae). Each entity may be defined a bit differently depending on the security products each offers.
You can find more information regarding MBSs and even a mortgage backed securities tutorial on the Internet.
Q: What exactly are mortgage backed securities and what companies offer them?
Many of us experienced in the stock market trading or have 401(k)s or private portfolios are familiar with the term "securities." A security is a holder's legal interest in a corporation, certificate, or note that may increase in financial value over time.
Corporate stocks, mutual funds, bonds, certificates of deposit, and notes can be considered securities. The holder of these securities experience can experience gains and losses. Depending on the strength of the security, gains and profits will vary. Gains are evidenced by the growth of a holder's stock portfolio, 401(k), CDs, or bonds. Also, dividend and annuity gains can be paid out as cash profits to the holders.
A mortgage backed security (MBS) is a bond financed by home mortgage payments. This is the essential concept behind the mortgage backed securities definition. The mortgage principal and interest paid by the homeowner is the principal and interest paid to the MBS holder. This is called "mortgage pass-through," which may also differentiate the MBS from other MBS programs that may have other features attached to it.
An investor who buys MBSs provides mortgage loans to the homebuyer (or business) as a consequence. The homeowner or mortgage loan holder controls the "cash flow" that goes to the MBS holder. As mentioned before, the homeowner pays off his mortgage's principal and interest over a designated period of time, i.e., 15, 20, or 30 years. The mortgage loan holder may prepay their entire mortgage at any time, which may upset the timing of the MBS investor's cash flow.
Mortgage prepayments usually occur when a house is sold or the homeowner decides to refinance his home with a second mortgage at a lower rate. This is a risk for the MBS investor.
But mitigating this MBS risk is something called the "option adjusted spread," which means the MBS is tied to government bonds' trade spread.
Other catalysts that spur the prepayment option not tied to interest rates include real estate price inflation, unemployment, economic growth, mortgage risk aversions, and change in borrowing regulations.
Overall, MBSs are an attractive and safe investment vehicle. Good income coupled with capital appreciation and tax-deferred savings are the main advantages to investing in these security or bond types. Like bonds, MBSs trade dynamically with little risk to liquidity. Also, MBSs are likened to treasuries in that they are safe and even offer a higher return of from 1% to 2%.
But, as intimated before, MBS monthly income can vary due to falling interest rates. This fall in interest rates may cause a higher rise in prepayments. As a result this may shorten the term of an MBS, but the investors benefit from the gains anyway.
So, you appear interested. What companies offer mortgage backed securities? Companies that offer MBSs include the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae). Each entity may be defined a bit differently depending on the security products each offers.
You can find more information regarding MBSs and even a mortgage backed securities tutorial on the Internet.
Monday, January 25, 2010
How to Get $6000 from CHAFA for your Down Payment!
The following data is from FHA websites. Buyers need to speak with a lender to determine their qualifications. Generally, these are going to work well for borrower / buyers who need down payment funds and are willing to use their 1st time homebuyer tax credit payment to repay the down payment "front" from CHAFA. In some instances one need not be a first-time borrower and and in some instances repayment differs. See Below:
On November 6, President Obama signed into law legislation to extend the $8,000 homebuyer tax credit until April 30, 2010 and expand it to include higher income homebuyers. The credit was scheduled to expire November 30, 2009. The new law also creates a new $6,500 tax credit for existing homeowners who have lived in their home for at least five consecutive years out of the last eight, and who wish to purchase a different home as their primary residence. This credit is available for homes purchased after November 6, 2009 and expires April 30, 2010.
To help buyers that need down payment and closing cost assistance when purchasing a home with the tax credit, a number of HFAs are offering special short-term second loans to qualified buyers. These loans are available for little or no interest and may be repaid with the homebuyer tax credit refund.
CHFA JumpStart2 Borrower Special Online Training and Form 912
The Worker, Homeownership and Business Assistance Act of 2009 (WHBAA) extended the temporary tax credit to provide a continuing incentive for first time homebuyers to purchase a home, or enter into a binding contract to purchase a home, on or before April 30, 2010, and close by June 30, 2010.
In addition, WHBAA allows a tax credit of up to $6,500 for long time homeowners who buy a replacement principal residence, so long as they have lived in the same principal residence for any five-consecutive–year period during the eight-year period that ended on the date the replacement home is purchased. A refundable tax credit of up to 10 percent of the cost of the home, not to exceed $8,000, is available to eligible first time homebuyers. The credit may be claimed by filing a Form 5405 with your Federal Income Tax Return.
See IRS Form 5405 for instructions or consult with your tax advisor. In general, a tax credit is used to reduce the amount of taxes owed. This tax credit is refundable, so you may be eligible to receive a refund even if you owe no taxes, or you owe less than the credit for which you are eligible.
For example, if you owe $500 in taxes and are eligible for the maximum $8,000 credit, you are eligible for a refund of $7,500 ($8,000 - $500). If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.
CHFA is offering the CHFA JumpStart2 Tax Credit Loan Program to enable first time homebuyers in need of closing costs and/or downpayment assistance to borrow funds on a short term basis under the new federal First-Time Homebuyers Tax Credit.
Eligible borrowers may receive from CHFA a loan in an amount up to three and one-half percent (3.5%) of the first mortgage loan amount or $6000, whichever is less, to be secured by a second mortgage loan. This second mortgage loan is only available in conjunction with a CHFA JumpStart2 Tax Credit First Mortgage Loan.
The First Mortgage Loan has monthly payments due and is payable over thirty (30) years. The Second Mortgage Loan has zero percent (0%) interest only until December 31, 2010. If you do not pay it off by that date, you must start making monthly payments and interest starts accruing at eight percent (8%) per annum for ten (10) years.
To avoid the payment of interest on this loan and to take full advantage of its benefits, you should pay the CHFA JumpStart2 Second Mortgage Loan in full when you receive your tax refund (but no later than December 31, 2010, to avoid the payment of interest).
CHFA is offering the CHFA JumpStart2 Second Mortgage Loan based upon the expectation it will be repaid in its entirety when you receive the tax credit refund. If you do not receive all or part of your tax credit, you are still liable for repayment of the loan. Instructions on how to repay the CHFA JumpStart2 Second Mortgage Loan to CHFA will be provided in your CHFA welcome package after loan closing.
You will receive a credit of $250 of the $350 Administration Fee you paid at closing if you repay CHFA the full amount of the CHFA JumpStart2 Second Mortgage Loan by December 31, 2010.
Note: Repayment of the CHFA JumpStart2 Second Mortgage loan does not remove your obligation to repay the federal government if the home ceases to be your main home within 36 months after closing. See IRS Form 5405 for guidance or consult with your tax advisor.
On November 6, President Obama signed into law legislation to extend the $8,000 homebuyer tax credit until April 30, 2010 and expand it to include higher income homebuyers. The credit was scheduled to expire November 30, 2009. The new law also creates a new $6,500 tax credit for existing homeowners who have lived in their home for at least five consecutive years out of the last eight, and who wish to purchase a different home as their primary residence. This credit is available for homes purchased after November 6, 2009 and expires April 30, 2010.
To help buyers that need down payment and closing cost assistance when purchasing a home with the tax credit, a number of HFAs are offering special short-term second loans to qualified buyers. These loans are available for little or no interest and may be repaid with the homebuyer tax credit refund.
CHFA JumpStart2 Borrower Special Online Training and Form 912
The Worker, Homeownership and Business Assistance Act of 2009 (WHBAA) extended the temporary tax credit to provide a continuing incentive for first time homebuyers to purchase a home, or enter into a binding contract to purchase a home, on or before April 30, 2010, and close by June 30, 2010.
In addition, WHBAA allows a tax credit of up to $6,500 for long time homeowners who buy a replacement principal residence, so long as they have lived in the same principal residence for any five-consecutive–year period during the eight-year period that ended on the date the replacement home is purchased. A refundable tax credit of up to 10 percent of the cost of the home, not to exceed $8,000, is available to eligible first time homebuyers. The credit may be claimed by filing a Form 5405 with your Federal Income Tax Return.
See IRS Form 5405 for instructions or consult with your tax advisor. In general, a tax credit is used to reduce the amount of taxes owed. This tax credit is refundable, so you may be eligible to receive a refund even if you owe no taxes, or you owe less than the credit for which you are eligible.
For example, if you owe $500 in taxes and are eligible for the maximum $8,000 credit, you are eligible for a refund of $7,500 ($8,000 - $500). If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit.
CHFA is offering the CHFA JumpStart2 Tax Credit Loan Program to enable first time homebuyers in need of closing costs and/or downpayment assistance to borrow funds on a short term basis under the new federal First-Time Homebuyers Tax Credit.
Eligible borrowers may receive from CHFA a loan in an amount up to three and one-half percent (3.5%) of the first mortgage loan amount or $6000, whichever is less, to be secured by a second mortgage loan. This second mortgage loan is only available in conjunction with a CHFA JumpStart2 Tax Credit First Mortgage Loan.
The First Mortgage Loan has monthly payments due and is payable over thirty (30) years. The Second Mortgage Loan has zero percent (0%) interest only until December 31, 2010. If you do not pay it off by that date, you must start making monthly payments and interest starts accruing at eight percent (8%) per annum for ten (10) years.
To avoid the payment of interest on this loan and to take full advantage of its benefits, you should pay the CHFA JumpStart2 Second Mortgage Loan in full when you receive your tax refund (but no later than December 31, 2010, to avoid the payment of interest).
CHFA is offering the CHFA JumpStart2 Second Mortgage Loan based upon the expectation it will be repaid in its entirety when you receive the tax credit refund. If you do not receive all or part of your tax credit, you are still liable for repayment of the loan. Instructions on how to repay the CHFA JumpStart2 Second Mortgage Loan to CHFA will be provided in your CHFA welcome package after loan closing.
You will receive a credit of $250 of the $350 Administration Fee you paid at closing if you repay CHFA the full amount of the CHFA JumpStart2 Second Mortgage Loan by December 31, 2010.
Note: Repayment of the CHFA JumpStart2 Second Mortgage loan does not remove your obligation to repay the federal government if the home ceases to be your main home within 36 months after closing. See IRS Form 5405 for guidance or consult with your tax advisor.
Sunday, January 24, 2010
Do You Know Everything You Should About the Move-Up Tax Credit?
Frequently Asked QuestionsAbout the Move-Up/Repeat Home Buyer Tax Credit
The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
1. Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.
2. What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date.
For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. That is, both spouses must qualify as long-time residents, with at least five years of principal residency for each. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.
3. How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.
4. Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5. What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007).
Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount.
Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250.
Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?
The previous tax credits applied only to first-time home buyers and were for different amounts of money.
9. How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).
Please note that although the Form is titled “First-Time Homebuyer Credit,” this is the correct form for claiming both the $8,000 first-time homebuyer tax credit and $6,500 repeat buyer tax credit.
No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and repeat home buyer tests.
Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase. In cases where a HUD-1 form is not used, such as for construction of some new homes, you should attach a copy of the certificate of occupancy in lieu of the HUD-1.Homebuyers should be sure to read the instructions for the revised IRS Form 5405 to be sure they meet the new program requirements.
10. What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
11. I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).
12. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. To provide proof of purchase, homebuyers must attach a copy of the HUD-1 Form or certificate of occupancy to IRS Form 5405.
13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.
14. I am not a U.S. citizen. Can I claim the tax credit?
Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits.
For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
15. Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $6,500 in income taxes and who receives an $6,500 tax credit would owe nothing to the IRS.A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.
16. Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding.
Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs.
17. HUD allows “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.Under the guidelines announced by HUD, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.
In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.
18. If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
19. For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
20. How can two unmarried buyers allocate the tax credit if one qualifies for the $8,000 first-time home buyer tax credit and the other qualifies for the $6,500 repeat home buyer credit?
The buyers can allocate the tax credit in any reasonable manner, provided neither claims a tax credit higher than the one they qualify for and the home purchase does not yield a total of more than $8,000 in tax credits. For example, the repeat home buyer could claim $6,500 and the first-time home buyer could claim $1,500. Alternatively, both buyers could claim a $4,000 tax credit.
21. Does a married couple qualify for any home buyer tax credit in the following situation?
Spouse A has lived in and owned the same principal residence for at least five years. Spouse B has lived in and owned the same principal residence for less than five years.In this situation, the couple does not qualify for any home buyer tax credit. Because the couple is married, the law tests the ownership history of both spouses. Spouse A clearly does not qualify for the $8,000 first-time home buyer tax credit, so neither does Spouse B.
Spouse A does appear to qualify for the $6,500 repeat buyer credit, but because Spouse B has not owned and lived in the same principal residence for at least five years, neither of them can claim the repeat home buyer tax credit.
Thursday, January 07, 2010
Serious Home Sellers are Listing Now
Here's why Sellers who are serious are pricing right and listing right now -
Homeowners should buck the conventional wisdom about selling in the spring.
Putting a home on the market in this grim real-estate climate might seem like lunacy considering how heavily the market favors buyers. Home prices are down 28% from their national peak in the second quarter of 2006, according to the S&P/Case-Shiller home price index, which tracks sales in 20 major housing markets. Still, listing a home during certain months can improve a seller's odds.
Late spring and summer are usually thought of as the best times to put a home on the market because buyer demand builds steadily through spring. Sales then peak during the warmest months, when it's easiest for families to move without uprooting their children from school. But this year, experts predict that the selling boom, which normally starts in spring, will hit at a different time than it has in the past. Sellers with flexibility should market their homes earlier in the year.
According to data from Zillow.com, an online real-estate database, the volume of home sales was highest in June, July or August every year since 2000. This year, however, an $8,000 credit for those buying their first home--that expires on June 30, 2010 and requires buyers to have closed on a home by April 30, 2010--will force buyers to speed up their decisions. Historically low interest rates also suggest that sellers will face a busier market as early as February.
"This year, we're anticipating sales will peak earlier," says Nicole Hall, editor in chief of Lendingtree.com, an online mortgage comparison service. "The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition."
The Economy Upsets Seasonal Trends
House hunting may have traditionally sped up after March, but nothing about the last few years in real estate has been traditional. In 2008, sales failed to pick up with their usual gusto in late winter because the financial crisis cast a shadow of fear over buyers, and lending seized up.
"Between the fall of 2008 and March of 2009, there was a long dead period in real estate," says Ken Shuman, spokesman for the real estate Web site Trulia.com. "You don't want to buy a house if you don't have job security, and a lot of people had jobs but didn't feel too secure about them."
2009 didn't follow typical trends, either. Fall, when sales usually plummet, saw more sales activity than usual this year because of the introduction of the government's tax credit, which was initially set to expire on Nov. 30, 2009.
Improving the Odds
Granted, some sellers have no choice but to sell at a slow time of year. Job relocation and the need to free up assets are facts of life that can deprive families of the luxury of waiting until the peonies bloom to put their homes on the market.
But Hall says that there are ways to improve your chances of a sale if you have to list your home late in the year, like playing up holiday decorations and shoveling walkways to maximize curb appeal. She adds that selling at this point in the cycle isn't always the worst fate.
"Look at how you can turn it to your advantage. Maybe because you're forced to sell at a different time, there will be less competition," she says. "Also, be realistic about your price. If you know you're selling at a tough time, it can be a tough call, but you might have to drop that price a little."
Shuman and Hall agree that the season shouldn't be the only factor homeowners consider when getting ready to sell. Paying attention to the vagaries of the local real-estate market, where inventory and prices can fluctuate week to week, will offer more guidance to sellers than simple seasonal trends.
"Check out your local inventory," says Hall. "Read the housing-market blogs, follow the local market really carefully, and look at the unemployment rate. That will make a big difference."
For smart sellers, Shuman and Hall agree, taking a chance and starting the sale process earlier will reap distinct benefits in 2010.
"The beginning of the year is going to be make-it-or-break-it," says Shuman. "If you're a seller, get your property listed as early in the year as you can."
By Francesca Levy, Forbes.com, Jan 4th, 2010 CALL or eMail to find out what the housing market has been doing recently in your neighborhood - Marie de Espinosa (720) 275-3926
Homeowners should buck the conventional wisdom about selling in the spring.
Putting a home on the market in this grim real-estate climate might seem like lunacy considering how heavily the market favors buyers. Home prices are down 28% from their national peak in the second quarter of 2006, according to the S&P/Case-Shiller home price index, which tracks sales in 20 major housing markets. Still, listing a home during certain months can improve a seller's odds.
Late spring and summer are usually thought of as the best times to put a home on the market because buyer demand builds steadily through spring. Sales then peak during the warmest months, when it's easiest for families to move without uprooting their children from school. But this year, experts predict that the selling boom, which normally starts in spring, will hit at a different time than it has in the past. Sellers with flexibility should market their homes earlier in the year.
According to data from Zillow.com, an online real-estate database, the volume of home sales was highest in June, July or August every year since 2000. This year, however, an $8,000 credit for those buying their first home--that expires on June 30, 2010 and requires buyers to have closed on a home by April 30, 2010--will force buyers to speed up their decisions. Historically low interest rates also suggest that sellers will face a busier market as early as February.
"This year, we're anticipating sales will peak earlier," says Nicole Hall, editor in chief of Lendingtree.com, an online mortgage comparison service. "The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition."
The Economy Upsets Seasonal Trends
House hunting may have traditionally sped up after March, but nothing about the last few years in real estate has been traditional. In 2008, sales failed to pick up with their usual gusto in late winter because the financial crisis cast a shadow of fear over buyers, and lending seized up.
"Between the fall of 2008 and March of 2009, there was a long dead period in real estate," says Ken Shuman, spokesman for the real estate Web site Trulia.com. "You don't want to buy a house if you don't have job security, and a lot of people had jobs but didn't feel too secure about them."
2009 didn't follow typical trends, either. Fall, when sales usually plummet, saw more sales activity than usual this year because of the introduction of the government's tax credit, which was initially set to expire on Nov. 30, 2009.
Improving the Odds
Granted, some sellers have no choice but to sell at a slow time of year. Job relocation and the need to free up assets are facts of life that can deprive families of the luxury of waiting until the peonies bloom to put their homes on the market.
But Hall says that there are ways to improve your chances of a sale if you have to list your home late in the year, like playing up holiday decorations and shoveling walkways to maximize curb appeal. She adds that selling at this point in the cycle isn't always the worst fate.
"Look at how you can turn it to your advantage. Maybe because you're forced to sell at a different time, there will be less competition," she says. "Also, be realistic about your price. If you know you're selling at a tough time, it can be a tough call, but you might have to drop that price a little."
Shuman and Hall agree that the season shouldn't be the only factor homeowners consider when getting ready to sell. Paying attention to the vagaries of the local real-estate market, where inventory and prices can fluctuate week to week, will offer more guidance to sellers than simple seasonal trends.
"Check out your local inventory," says Hall. "Read the housing-market blogs, follow the local market really carefully, and look at the unemployment rate. That will make a big difference."
For smart sellers, Shuman and Hall agree, taking a chance and starting the sale process earlier will reap distinct benefits in 2010.
"The beginning of the year is going to be make-it-or-break-it," says Shuman. "If you're a seller, get your property listed as early in the year as you can."
By Francesca Levy, Forbes.com, Jan 4th, 2010 CALL or eMail to find out what the housing market has been doing recently in your neighborhood - Marie de Espinosa (720) 275-3926
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