Time is fast running out for first-time buyers hoping to get a tax credit of up to $8,000, and Realtors say they’re seeing a marked upswing in interest as the deadline looms.
Real estate groups also are urging Congress to extend the credit beyond its current deadline and expand the tax credit to up to $15,000. Now, buyers must close on their purchase by Nov. 30 to be eligible for the credit.
Home builders and real estate organizations are concerned that letting the tax credit expire could knock the wind out of the current housing recovery. And failing to expand the credit could imperil efforts to get more move-up buyers into the market.
“Right now, the recovery is in the first stage and getting entry-level buyers in, but it’s having no impact on the move-up buyer,” says Richard Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker and others. “If we can expand the credit to go after that move-up buyer, we’ll be home free.”
The tax credit available to first-time homebuyers is already linked with an uptick in sales. For the first time in five years, existing home sales have increased for four months in a row, according to an August report by the National Association of Realtors (NAR).
Sales rose 7.2 percent in July from June, and pending sales are 5 percent above the pace seen in July of 2008
Many of those using the tax credit, however, are buying up foreclosed homes that are vacant. That does little to stimulate sales by homeowners looking to move up to more expensive properties. Getting more move-up buyers into the market is considered the second stage of the housing recovery.
And even though the tax credit doesn’t expire until Nov. 30, today’s home purchases take 45-60 days to close as the underwriting and appraisal process is taking longer because lenders are being more cautious. That means offers that will benefit from the tax credit really need to be in this month or early next month.
“Buyers have more of a sense of urgency,” says Tony Middleton, a Realtor in Los Angeles with ZipRealty, of the expiring tax credit. “They’re serious about shopping for a home.”
There is legislation in both the Senate and the House that would expand the tax credit. A proposal by Sen. Johnny Isakson, R-Ga., would raise the credit amount to a maximum of $15,000 for any buyer of any home over the next year. It would remove the income caps that currently apply (those limits are now $75,000 for an individual and $150,000 on couples).
“I think we’ve got a realistic chance of doing this,” Isakson says. “Our problem is not with the first-time home buyer, it’s the move-up buyer.”
Lawrence Yun, chief economist at NAR, says extending or raising the tax credit would spur the housing recovery, which in turn would help bolster the economy.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
Monday, September 21, 2009
Tuesday, September 8, 2009
Foreclosures in neighborhood hurt your home's value
A Bradenton couple recently found a buyer willing to pay $137,000 for their home. But the deal fell apart when the appraised value came in 12 percent lower - at $120,000.
It's a painful scene playing out all over the Tampa Bay area.
In Riverview, a homebuyer agreed to pay $162,000, but the appraisal came back at $150,000. A Trinity homeowner had a contract to sell for $207,000 - 6 percent more than the appraisal of $195,000.
All of these homes appraised for less than the amount a buyer was willing to pay because of one thing: too many foreclosures and distressed sales in the neighborhood, said David Teacher, who was hired to appraise the homes by the buyers' lenders.
"When there are bank-owned homes in basically the same condition that have sold or are listed for sale for cheaper, an appraiser has to consider them," Teacher said.
In this fragile real estate market, what your neighbor does has never mattered more. Sellers have to compete with distressed sellers, even if they're not distressed themselves.
Every time a home in your neighborhood, or especially on your street, sells at a fire-sale price, your home's value is likely to drop, too.
The issue has, at times, pitted real estate professionals, such as appraisers, builders and real estate agents, against one another.
Appraisers determine value, in part, by looking at comparable sales in the area. Teacher said he tries to find "regular" sales to use as comparables, but that's not possible in some neighborhoods with a large supply of distressed sales.
That said, he says some appraisers use the closest distressed sales and ignore comparable sales that would have rendered a higher value.
For example, he recently appraised a Palm Harbor home for 6 percent more than the bank ended up accepting. That sale will now affect other appraisals in the neighborhood, even though the appraisal was low.
Appraisals aren't just affecting regular Joes trying to sell their homes. Builders are increasingly being told by lenders that new homes drop in value so much during the construction process that they can't fund loans.
Jennifer Doerfel, executive vice president of the Tampa Bay Builders Association, said one of the reasons the values are dropping is because distressed sales nearby drag down the values.
The problem is, she said, foreclosed homes aren't worth as much as new homes.
"In most cases, these foreclosures and short sales aren't comparable at all," Doerfel said. "There's likely mold or other damage in the distressed home. The home that's in better condition should be worth more."
This year's showcase home for the builders association was expected to have a value of $1.3 million, she said. But now that it's completed, the appraised value is less than it cost the builder to construct it.
So what can you do if you disagree with a low-ball appraisal on your home?
Some homeowners have had success by asking their real estate agents to fight it, Teacher said. If the appraiser overlooked higher comparable sales, you can point those out to the lender and buyer.
Sometimes, he said, it makes a difference.
But if you live in a neighborhood hit hard by foreclosures, you're likely going to have to live with it.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
It's a painful scene playing out all over the Tampa Bay area.
In Riverview, a homebuyer agreed to pay $162,000, but the appraisal came back at $150,000. A Trinity homeowner had a contract to sell for $207,000 - 6 percent more than the appraisal of $195,000.
All of these homes appraised for less than the amount a buyer was willing to pay because of one thing: too many foreclosures and distressed sales in the neighborhood, said David Teacher, who was hired to appraise the homes by the buyers' lenders.
"When there are bank-owned homes in basically the same condition that have sold or are listed for sale for cheaper, an appraiser has to consider them," Teacher said.
In this fragile real estate market, what your neighbor does has never mattered more. Sellers have to compete with distressed sellers, even if they're not distressed themselves.
Every time a home in your neighborhood, or especially on your street, sells at a fire-sale price, your home's value is likely to drop, too.
The issue has, at times, pitted real estate professionals, such as appraisers, builders and real estate agents, against one another.
Appraisers determine value, in part, by looking at comparable sales in the area. Teacher said he tries to find "regular" sales to use as comparables, but that's not possible in some neighborhoods with a large supply of distressed sales.
That said, he says some appraisers use the closest distressed sales and ignore comparable sales that would have rendered a higher value.
For example, he recently appraised a Palm Harbor home for 6 percent more than the bank ended up accepting. That sale will now affect other appraisals in the neighborhood, even though the appraisal was low.
Appraisals aren't just affecting regular Joes trying to sell their homes. Builders are increasingly being told by lenders that new homes drop in value so much during the construction process that they can't fund loans.
Jennifer Doerfel, executive vice president of the Tampa Bay Builders Association, said one of the reasons the values are dropping is because distressed sales nearby drag down the values.
The problem is, she said, foreclosed homes aren't worth as much as new homes.
"In most cases, these foreclosures and short sales aren't comparable at all," Doerfel said. "There's likely mold or other damage in the distressed home. The home that's in better condition should be worth more."
This year's showcase home for the builders association was expected to have a value of $1.3 million, she said. But now that it's completed, the appraised value is less than it cost the builder to construct it.
So what can you do if you disagree with a low-ball appraisal on your home?
Some homeowners have had success by asking their real estate agents to fight it, Teacher said. If the appraiser overlooked higher comparable sales, you can point those out to the lender and buyer.
Sometimes, he said, it makes a difference.
But if you live in a neighborhood hit hard by foreclosures, you're likely going to have to live with it.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
Monday, September 7, 2009
Florida Expected to Face More Financial Woes
Florida can expect more potential deficits during the next three budget years, the Legislature’s top economist told a panel of lawmakers from both chambers Thursday.
Amy Baker, coordinator of economic and demographic research, laid out that scenario for the Legislative Budget Commission. It’ll be part of a three-year financial outlook the panel will finalize when it meets again Sept. 15.
Baker said the state has sufficient reserves to cover $285.9 million in unbudgeted needs that now are expected during the current budget year, which runs through June 30.
But lawmakers are facing a potential deficit of $923 million to pay for critical needs, such as expenditures required by the Florida Constitution, court orders and federal law in the next budget year. The gap jumps to $2.6 billion if other high priority needs – those the Legislature has historically funded – are added.
For 2011-12, the budget gap could range from $2.3 billion for critical needs to $5 billion including priority needs. In 2012-13 it could be at least $1.1 billion and as much as $5.2 billion.
“This tells you that it would be a significant stretch to try to get to a budget level that we’re probably more used to seeing,” Baker said.
Florida’s current budget of $66.5 billion is about $5 billion less than the one Gov. Charlie Crist signed into law two years ago. That’s even though it’s fortified with $5.3 billion in federal stimulus money.
The state expects to have a similar amount of stimulus in next year’s budget, but it won’t be there the following year. That’s one reason why Baker is projecting budget gaps even though state revenues are expected to begin growing again next year. That’s after they have fallen for three straight years.
Most of the current-year, over-budget spending is in the state-federal Medicaid program — $225 million. The Voluntary Pre-kindergarten program needs $17.5 million more because enrollment has topped expectations while the Principal State School Trust Fund is facing a $38 million shortfall.
The state’s Risk Management Trust Fund also is short by $5.3 million due mainly to an unusually large settlement last month. The state agreed to pay nearly $4 million to two children for keeping them in a Hernando County home where they had been abused and starved by their foster parents.
The state can dip into reserves to cover those current-year needs and still have a $381.4 million cushion, Baker said.
Next year, though, the state is facing a $2.8 billion increase in critical needs that revenue growth will only partly offset, Baker said.
They include $515 million in additional general revenue for public schools to make up for a drop in property tax receipts and $1.6 billion for Medicaid to cover additional patients and make up for a falloff in federal stimulus money.
Baker’s forecast for other high priority needs next year totals $1.7 billion. It includes $498.5 million to increase public school spending by 2.87 percent per student and $250 million for aged, disabled and medically needy patients not covered by the basic Medicaid program.
“We always expected it was going to be a difficult and challenging budget year,” said Rep. David Rivera, a Miami Republican who chairs the commission. “You can expect the Florida Legislature to live within its means.”
In 2011-12, the state’s critical needs will include $1.2 billion for public schools to replace stimulus money they’ll be losing and another $1.1 billion for Medicaid.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
Amy Baker, coordinator of economic and demographic research, laid out that scenario for the Legislative Budget Commission. It’ll be part of a three-year financial outlook the panel will finalize when it meets again Sept. 15.
Baker said the state has sufficient reserves to cover $285.9 million in unbudgeted needs that now are expected during the current budget year, which runs through June 30.
But lawmakers are facing a potential deficit of $923 million to pay for critical needs, such as expenditures required by the Florida Constitution, court orders and federal law in the next budget year. The gap jumps to $2.6 billion if other high priority needs – those the Legislature has historically funded – are added.
For 2011-12, the budget gap could range from $2.3 billion for critical needs to $5 billion including priority needs. In 2012-13 it could be at least $1.1 billion and as much as $5.2 billion.
“This tells you that it would be a significant stretch to try to get to a budget level that we’re probably more used to seeing,” Baker said.
Florida’s current budget of $66.5 billion is about $5 billion less than the one Gov. Charlie Crist signed into law two years ago. That’s even though it’s fortified with $5.3 billion in federal stimulus money.
The state expects to have a similar amount of stimulus in next year’s budget, but it won’t be there the following year. That’s one reason why Baker is projecting budget gaps even though state revenues are expected to begin growing again next year. That’s after they have fallen for three straight years.
Most of the current-year, over-budget spending is in the state-federal Medicaid program — $225 million. The Voluntary Pre-kindergarten program needs $17.5 million more because enrollment has topped expectations while the Principal State School Trust Fund is facing a $38 million shortfall.
The state’s Risk Management Trust Fund also is short by $5.3 million due mainly to an unusually large settlement last month. The state agreed to pay nearly $4 million to two children for keeping them in a Hernando County home where they had been abused and starved by their foster parents.
The state can dip into reserves to cover those current-year needs and still have a $381.4 million cushion, Baker said.
Next year, though, the state is facing a $2.8 billion increase in critical needs that revenue growth will only partly offset, Baker said.
They include $515 million in additional general revenue for public schools to make up for a drop in property tax receipts and $1.6 billion for Medicaid to cover additional patients and make up for a falloff in federal stimulus money.
Baker’s forecast for other high priority needs next year totals $1.7 billion. It includes $498.5 million to increase public school spending by 2.87 percent per student and $250 million for aged, disabled and medically needy patients not covered by the basic Medicaid program.
“We always expected it was going to be a difficult and challenging budget year,” said Rep. David Rivera, a Miami Republican who chairs the commission. “You can expect the Florida Legislature to live within its means.”
In 2011-12, the state’s critical needs will include $1.2 billion for public schools to replace stimulus money they’ll be losing and another $1.1 billion for Medicaid.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
Sunday, September 6, 2009
83 Year Old First Time Home Buyer
At 83 years old, Alget Campbell isn’t as nimble as he used to be. His joints are a little rusty and he has some trouble getting around. On Monday, though, after he closed on his very first home, Campbell was doing cartwheels inside, his daughter said.
“Your own is your own,” said a satisfied Campbell, a native of Jamaica, who with his wife, Hermine, will move into their Miramar townhome in about a month. “I want something for myself. I don’t like to pay other people’s mortgages.”
After more than a year of looking with help from his daughter, Joan Grant, Campbell found the perfect home – a three-bedroom foreclosure about five minutes from family who will be able to keep closer watch on the elderly couple.
The closing price: $71,425 – minus the $8,000 first-time home buyer federal tax credit, of course.
Campbell’s monthly payments, including taxes and insurance, are about $550, an amount he can comfortably cover with Social Security, retirement savings and income from a rental property owned by his wife.
The couple will have to invest in a new air conditioner and replace the windows, but otherwise the property is in decent condition, said Campbell, who retired two years ago as a Publix clerk in Southwest Miami-Dade.
This is Campbell’s first home purchase, but his wife owned the home where the couple used to live.
As South Florida home prices continue sinking, buyers like Campbell are wading into a market offering the most affordable home prices in at least a decade.
Not since 1998 have houses been this cheap relative to family income in Miami-Dade County. In Broward, homes haven’t been as affordable since 1994, according to Moody’s Economy.com.
The new low-priced reality means many buyers can own for much less than it costs to rent, even before taking into account income tax deductions for mortgage interest, mortgage insurance and property taxes. As recent sales figures reflect, many are jumping at the opportunity.
Campbell, for one, said he didn’t think he could rent a three-bedroom, two-bathroom home in a similar subdivision for $550 a month. The home is about 1,300 square feet and has a one-car garage and a small yard.
“Housing affordability has increased so that the family earning the median family income can afford more than the median priced home in Miami-Dade, Broward and Palm Beach,” said Chris Lafakis, an economist with Moody’s who tracks Florida and South Florida.
Moody’s uses a proprietary index that factors in home prices, income and other financial variables like regional mortgage rates to gauge affordability.
An index value of 100 means a family of four earning the median income can afford to buy the median priced home. During the heyday of the housing boom as prices soared, the index plunged to an all-time low of 49 in Miami-Dade at the end of 2005, indicating the average family could scarcely afford half the price of a middling home.
In Broward, the record low of 63 occurred about the same time.
Since then, tumbling values have brought home ownership comfortably within reach of individuals such as Campbell.
At the end of the second quarter, the index, which excludes condominiums, hit 126 in Miami-Dade and 159 in Broward. This means a family earning the median income can afford to buy a home for 26 percent above the median price in Miami-Dade and a full 59 percent above the median price in Broward, giving them ample options.
At the end of the second quarter, the median home price was $195,000 in Miami-Dade and $195,500 in Broward, down 35 percent from the same quarter the year before, according to the Florida Association of Realtors.
There is currently a vast supply of homes listed below those prices.
Second-quarter median income statistics aren’t available yet, but at the end of March, the median income for a family of four in Miami-Dade was $50,150, and in Broward, $63,100.
While the low prices have spurred a flurry of new buying, the dramatic increase in affordability has not boosted sales to a corresponding level.
The reasons for that are tighter mortgage underwriting standards that are making it difficult for borrowers to qualify for financing. Despite his ability to put down 20 percent, Campbell said he had to jump through numerous hoops before lenders would qualify him.
Concerns that prices still have further to fall are also dampening demand.
“It’s a deflationary psychology that is self-reinforcing,” Lafakis said. “Home buyers expect house prices to fall, so they don’t buy. Then, because nobody is buying houses, prices do fall.”
Nonetheless, Marcia Pennant, Campbell’s real estate agent and a broker with Coldwell Banker’s Cooper City office, said new home buyers are motivated by the low prices, the tax credit and low interest rates.
“There are definitely more buyers at this time – the bank-owned properties are cheaper, the short-sales make them cheaper. That creates multiple offers in some situations on these homes,” Pennant said. “Some homes have more than one offer and sometimes as many as 20.”
As for Campbell, who is leaving his neighborhood of the past 17 years, he will miss visiting friends at the nearby Publix, where he worked for 17 years.
And then, there is his gardening.
“I am going to miss the ackee plants and banana trees and all those trees I planted from scratch,” Campbell said.
But he’s looking forward to his new backyard.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
“Your own is your own,” said a satisfied Campbell, a native of Jamaica, who with his wife, Hermine, will move into their Miramar townhome in about a month. “I want something for myself. I don’t like to pay other people’s mortgages.”
After more than a year of looking with help from his daughter, Joan Grant, Campbell found the perfect home – a three-bedroom foreclosure about five minutes from family who will be able to keep closer watch on the elderly couple.
The closing price: $71,425 – minus the $8,000 first-time home buyer federal tax credit, of course.
Campbell’s monthly payments, including taxes and insurance, are about $550, an amount he can comfortably cover with Social Security, retirement savings and income from a rental property owned by his wife.
The couple will have to invest in a new air conditioner and replace the windows, but otherwise the property is in decent condition, said Campbell, who retired two years ago as a Publix clerk in Southwest Miami-Dade.
This is Campbell’s first home purchase, but his wife owned the home where the couple used to live.
As South Florida home prices continue sinking, buyers like Campbell are wading into a market offering the most affordable home prices in at least a decade.
Not since 1998 have houses been this cheap relative to family income in Miami-Dade County. In Broward, homes haven’t been as affordable since 1994, according to Moody’s Economy.com.
The new low-priced reality means many buyers can own for much less than it costs to rent, even before taking into account income tax deductions for mortgage interest, mortgage insurance and property taxes. As recent sales figures reflect, many are jumping at the opportunity.
Campbell, for one, said he didn’t think he could rent a three-bedroom, two-bathroom home in a similar subdivision for $550 a month. The home is about 1,300 square feet and has a one-car garage and a small yard.
“Housing affordability has increased so that the family earning the median family income can afford more than the median priced home in Miami-Dade, Broward and Palm Beach,” said Chris Lafakis, an economist with Moody’s who tracks Florida and South Florida.
Moody’s uses a proprietary index that factors in home prices, income and other financial variables like regional mortgage rates to gauge affordability.
An index value of 100 means a family of four earning the median income can afford to buy the median priced home. During the heyday of the housing boom as prices soared, the index plunged to an all-time low of 49 in Miami-Dade at the end of 2005, indicating the average family could scarcely afford half the price of a middling home.
In Broward, the record low of 63 occurred about the same time.
Since then, tumbling values have brought home ownership comfortably within reach of individuals such as Campbell.
At the end of the second quarter, the index, which excludes condominiums, hit 126 in Miami-Dade and 159 in Broward. This means a family earning the median income can afford to buy a home for 26 percent above the median price in Miami-Dade and a full 59 percent above the median price in Broward, giving them ample options.
At the end of the second quarter, the median home price was $195,000 in Miami-Dade and $195,500 in Broward, down 35 percent from the same quarter the year before, according to the Florida Association of Realtors.
There is currently a vast supply of homes listed below those prices.
Second-quarter median income statistics aren’t available yet, but at the end of March, the median income for a family of four in Miami-Dade was $50,150, and in Broward, $63,100.
While the low prices have spurred a flurry of new buying, the dramatic increase in affordability has not boosted sales to a corresponding level.
The reasons for that are tighter mortgage underwriting standards that are making it difficult for borrowers to qualify for financing. Despite his ability to put down 20 percent, Campbell said he had to jump through numerous hoops before lenders would qualify him.
Concerns that prices still have further to fall are also dampening demand.
“It’s a deflationary psychology that is self-reinforcing,” Lafakis said. “Home buyers expect house prices to fall, so they don’t buy. Then, because nobody is buying houses, prices do fall.”
Nonetheless, Marcia Pennant, Campbell’s real estate agent and a broker with Coldwell Banker’s Cooper City office, said new home buyers are motivated by the low prices, the tax credit and low interest rates.
“There are definitely more buyers at this time – the bank-owned properties are cheaper, the short-sales make them cheaper. That creates multiple offers in some situations on these homes,” Pennant said. “Some homes have more than one offer and sometimes as many as 20.”
As for Campbell, who is leaving his neighborhood of the past 17 years, he will miss visiting friends at the nearby Publix, where he worked for 17 years.
And then, there is his gardening.
“I am going to miss the ackee plants and banana trees and all those trees I planted from scratch,” Campbell said.
But he’s looking forward to his new backyard.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
Friday, September 4, 2009
Mortgage rates edge down, still above record lows
Rates for 30-year home loans edged down this week, remaining close to record lows reached over the spring.
The average rate for a 30-year fixed mortgage was 5.08 percent, down from 5.14 percent a week earlier, mortgage company Freddie Mac said Thursday. Rates, while above the record low of 4.78 percent hit in the spring, are still at attractive levels for people looking to buy a home or refinance.
“Low mortgage rates are helping to keep housing very affordable,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.
To revive the economy, the Federal Reserve is spending $1.25 trillion on mortgage-backed securities, which has driven down rates on home loans. That money is set to run out by winter, though some analysts expect the central bank to gradually scale back its purchases, allowing the program to last longer.
Despite government efforts to prop up the mortgage market, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage fell to 4.54 percent, from 4.58 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.59 percent, down from 4.67 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.62 percent from 4.69 percent.
The rates do not include add-on fees known as points. The nationwide fee for all loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans and 0.6 point for 15-year, five-year and one-year loans.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
The average rate for a 30-year fixed mortgage was 5.08 percent, down from 5.14 percent a week earlier, mortgage company Freddie Mac said Thursday. Rates, while above the record low of 4.78 percent hit in the spring, are still at attractive levels for people looking to buy a home or refinance.
“Low mortgage rates are helping to keep housing very affordable,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.
To revive the economy, the Federal Reserve is spending $1.25 trillion on mortgage-backed securities, which has driven down rates on home loans. That money is set to run out by winter, though some analysts expect the central bank to gradually scale back its purchases, allowing the program to last longer.
Despite government efforts to prop up the mortgage market, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
The average rate on a 15-year fixed-rate mortgage fell to 4.54 percent, from 4.58 percent last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.59 percent, down from 4.67 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.62 percent from 4.69 percent.
The rates do not include add-on fees known as points. The nationwide fee for all loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans and 0.6 point for 15-year, five-year and one-year loans.
www.anthonycruzjr.com
www.twitter.com/fla_real_estate
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