Local Housing Market Needs Listings

The local housing market continues to steam forward.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.

It’s the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006. A Pending Home Sale is a home under contract to sell, but not yet closed. It’s the precursor to an Existing Home Sale.

Trade group data shows that nearly 80 percent of “pending” homes close within 2 months. The majority of those remaining close within months 3 and 4.

When the Pending Home Sales Index rises, it tells us that market activity has picked up. September’s data confirms what we’ve been noticing since February — the Buyers Market is ending.

With more homes under contract in the marketplace, homebuyers typically face one or more of the following:

1. Competitive, multiple-offer situations
2. Reduced purchase price leverage over sellers
3. Fewer seller concessions

Therefore, if you’re buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. The extension of the home buyer tax credit will tend to keep healthy activity in the housing market, boosted by expanded eligibility to existing home owners. All in all, we should see a result in stabilized if not higher home prices, over time.

Indeed, we’re already beginning to see it with multiple offers and price overbidding in some cases, although lags in appraiser values are tending to moderate prices after the bubble's irrational exuberance in home prices.

Right now, the Santa Clarita area active listings number is at near historic lows. Low inventory, especially in the under $500,000 price range, combined with still-low interest rates has resulted in too many potential buyers chasing too few available homes. Over time, if these conditions continue, prices will rise. However, many in the housing industry think that banks are still overwhelmed with foreclosed inventory that is being held off the market and will be offered for sale starting within the next few months. The so-called 'shadow inventory', as it is released, will tend to keep home prices at or near current levels.

So I would not count on any imminent large rise in home prices just yet. But it is a volatile and fragile market. Please give us a call to find out how you can best position yourself for continued changes in the housing market at 661-290-3750.

First-Time Home Buyer Tax Credit not complete

First-Time Home Buyer Tax Credit Gets Obama Nod


An extension of the $8,000 first-time home buyer tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk. The move comes shortly after Senate lawmakers stuck an agreement to not only push back the measure's looming deadline but expand it to allow current homeowners and more affluent buyers to claim the credit. "We welcome efforts taken by Congress to extend the first-time home buyers tax credit for a limited period," Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan said in a joint statement today. "This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide." Here are five things you need to know about the development:

1. Roots and impact: A tax credit of as much as $8,000 for certain qualified first-time home buyers was included in the Obama administration's sweeping economic stimulus package, which the president signed in mid-February. The measure was designed to stimulate additional demand for residential real estate and help absorb the overhang of unsold properties that was putting downward pressure on home prices. Along with cheaper home prices and attractive mortgage rates, the perk has helped reduce the glut of unsold properties. Mark Zandi, the chief economist at Moody's Economy.com, expects the tax credit to result in as many as 400,000 additional home sales by the time of its scheduled expiration at the end of November. But trade groups—like the National Association of Home Builders and the National Association of Realtors—have been lobbying Congress to push the deadline back, arguing that failing to do so would jeopardize recent signs of stability in the housing market. The NAHB, for example, blamed yesterday's weaker-than-expected new home sales report on the tax credit's impending expiration.

2. Extending the deadline: Although various proposals to extend and expand the credit have circulated in Congress for weeks, Senate lawmakers finally reached a deal in recent days. Under the terms of the agreement, the deadline for first-time home buyers to claim the $8,000 credit would be pushed back to April 30, 2010. But the term "deadline" doesn't mean the same thing as it does in the current credit. The Senate agreement stipulates that buyers must have a sales contract on a house by April 30 to be eligible, but it gives them an additional 60 days to close the purchase. That's much different from the current credit, in which transactions must be closed by November 30. Looked at one way, the effective deadline of the credit under this agreement is actually the end of June.

3. Existing buyers: But perhaps the most significant change is that current homeowners would become eligible for the tax perk as well. The current credit prevents home buyers who have owned a primary residence within the past three years from claiming the credit. The agreement, however, would allow current homeowners to claim up to $6,500 as long as the property they are vacating has been their primary residence for at least five years. Expanding the credit beyond first-time buyers is intended to boost home sales to "move up" buyers—those moving from one house to another—which some lawmakers, most notably Georgia Republican Sen. Johnny Isakson, argue is essential to a housing recovery.

4. More-affluent home buyers: The agreement also enables more affluent Americans to claim the tax credit. Senators moved to increase its annual income limits from $75,000 to $125,000 for single buyers and from $150,000 to $225,000 for married couples. These limits apply to both first-time and move-up buyers, although neither can purchase a home for more than $800,000 and still get the credit. Anyone taking the credit on a 2010 purchase can claim it on his or her 2009 tax return. And as long as home buyers live in the property they purchased via the credit for three years or more, the tax credit does not have to be repaid.

5. Credit controversy: Zandi estimates that the Senate agreement would generate more home sales than the current credit would. "It's broader, [and] the industry is geared up to take advantage of it now," he says. But first-time home buyer tax credits have already cost the government more than $10 billion in lost revenue, and Zandi expects that the Senate agreement would cost at least as much. And although it's been popular with those purchasing homes, some economists have called the credit an inefficient use of federal resources. Calculated Risk, a financial blog, has estimated that Uncle Sam has paid $43,000 for every additional home sale. And the Senate agreement—which enables households making more than $200,000 a year to claim the credit—could certainly appear overly generous in a time of trillion-dollar budget deficits.

At the same time, the credit has recently been linked to widespread abuse. Russell George, the Treasury Department's inspector general for tax administration, told a congressional panel last week that 19,300 taxpayers had claimed the first-time home buyer credit before they had even purchased a home. In another 74,000 cases—totaling more than $500 million—taxpayers claimed the credit despite evidence that they had owned a home within the past three years. And in at least one case, a 4-year-old claimed the credit, George said.

Although the agreement appears to have broad bipartisan support, it still has to get out of the chamber. Along the way, it could be stripped of certain generous provisions. But in light of the White House support, it appears all but certain that at the very least, the first-time home buyer tax credit will be extended beyond its November 30 deadline.

Brian Woolley
Prospect Mortgage
661.645.3499
bwloans@ca.rr.com

Senate approves extends and expands home buyer credit

The measure is expected to be approved by the House and signed by Obama within days. It is aimed at giving the real estate market an added boost and would expand the credit to existing homeowners.

Reporting from Washington - The Senate today voted to extend and expand a tax credit for home buyers as an added boost for the recovering real estate market, and also approved a provision to continue giving aid to the long-term unemployed.

The measure, adopted on a strong bipartisan vote of 98-0, also would extend and expand a tax benefit for businesses with losses. The House is expected to follow suit within days, and President Obama is expected to sign it into law.

To keep fueling the real estate rebound, the legislation would extend the $8,000 tax credit for first-time home buyers to April 30. It now is set expire at the end of the month. More importantly, it also would provide a new $6,500 tax break for existing homeowners who want to move up to a new home, as long as they have lived in their current residence for five consecutive years out of the last eight.

The bill also would increase the level of qualifying incomes to $125,000 for individual tax filers and $225,000 for joint filers. Those earning up to $145,000 individually or up to $245,000 jointly would get a smaller credit that decreases as income rises.

The tax credits apply to home purchases of $800,000 or less.

"Every economist will tell you we have to steady the housing market before the economy will turn around," said Sen. Christopher Dodd (D-Conn.). "We can't afford to let this tax credit expire now."

With the unemployment rate at 9.8% and expected to go higher, senators voted to extend jobless benefits by 14 weeks in all states and 20 weeks in the hardest hit states, including California.

The $2.4-billion extension of unemployment benefits gained bipartisan support after it was written to cover all states, making it more appealing to senators. It would provide a longer extension of benefits in the 27 states now with unemployment rates of 8.5% or higher. California's 12.2% unemployment rate in September trailed only Michigan, Nevada and Rhode Island.

Congress included an extension of unemployment benefits in the economic recovery bill approved this year, but up to 600,000 people have already exhausted their benefits, and an additional 700,000 are scheduled lose them by the end of the year, according to the National Employment Law Project.

For all companies, the measure would allow them to use any losses this year or last year to offset taxes paid in the previous five years. A similar measure was included in the economic stimulus legislation approved earlier this year, but was limited to small businesses.

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