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2009 Market Trends and Outlook

June 17, 2009 by  
Filed under Featured, National, Puget Sound Region

We had our 2009 Market Trends and Outlook meeting by local economist Matthew Gardner yesterday.  For the most part, Gardner has been right on with his predictions over the years and we really enjoy attending his speeches, since he’s also very good at presenting both the good and bad sides.  Gardner usually presents the bad, then the good and that’s important to know. A lot of his slides that we’ll be posting will agree with those who might prefer to trust in the gloom of the market, but will also show that comparably, the Seattle market fares extremely well over the rest.

Revolving Debt

Before jumping into how resilient Seattle is, lets first look at the positive side of the recession.  The U.S. is currently seeing a steep decline in revolving debt.

revolving_debt

So, we’re saving money, which is good.  The flip side is that we can expect to see more Chapter 11’s filed in the retail sector.

saving_spending

National Home Sales

In addition, national home sale prices have in fact hit bottom back in January (almost half a year ago now).  Predicting that the market will pick up can no longer be assumed as a prediction considering that the last three months has shown positive appreciation in prices.

sale_prices

Over the last four months, we’ve continued to see an establishment of a base, but we feel pretty safe in saying that prices have shown they’re stabilizing.  Most importantly, they’re not going down.  Gardner is predicting the flatlining of prices will get a lot more first-time home buyers off the fence, which in turn will allow those selling to move up themselves.

pmi

Unfortunately we will start to see a lot of our builders closing their doors due to the lack of funding and high construction costs.  As a result, we should start to see much more of our current inventory taken up.  Like we’ve said before, if it’s not under construction, it won’t get built–especially when referring to the downtown market where we more than likely will not see any new inventory break ground other than that that are already under construction.

Escala (274 units)
ENSO (135 units)
Alex (units) until 2011 or later

SF = Single Family

permits

Sustainability

In 2008, we saw 31.2% declines in San Francisco, 26.4% in Los Angeles, 24.8% in San Diego, 28.8% Miami, 33% in Las Vegas, and a whopping 34% decline in Phoenix.  Whose to say Seattle won’t see up-and-coming declines similar to those markets?  Our highest decline so far has been 17.1%.  Seattle has only experienced an appreciation of 17.1% in 2005 (during our local condo boom) while the other major markets in mention have seen 30%, 24.9%, 26.6%, 31.5%, 45.5% and 44.9% appreciation rates which are simply unsustainable!

app_dep

Employment

But what about all those lost jobs?  Microsoft, Boeing, Starbucks…  ? Unemployment in Seattle is still lower than what it was during the dot com bust in 2001/02.

unemployment

…not by much, but we still ended up on top when it came time to create more jobs.

viaductTo those who might worry the jobs just won’t be able to be created, consider the huge amount of upcoming city improvements.  The rapid transit/light rail is well underway and has already begun testing.   The amount of road construction for 2009 alone makes it impossible to even make out what’s even going on when attempting to look at the City-Wide Planning Transportation Construction page on Seattle.gov.  The Pike Place Market is undergoing $68 million of renovations which is expected to be completed in 2012.  Another very exciting improvement adding to the thousands of jobs we can expect to see over the next couple of years is the Alaskan Way Viaduct’s cremation and burial.  Although Gardner didn’t address all these new jobs, it is very much of a contributing factor to our city being the most likely to rebound as already mentioned in Forbes.

Unemployment is a lagging indicator rather than a leading indicator. -Gardner

recover_map

Consumer Confidence

With all those “yeah, but’s,” we’re finding it really difficult of find any real data that our market has not shown a positive trend since the 1st quarter.  It does seem as though the hard climb we’ve had to make getting to somewhat of a level ground is over, and we can begin to get on with our lives during the final half of the year just as Gardner had predicted.

confidence

What’s your confidence level?

Sorry, there are no polls available at the moment.

New Urbanism and Environmental Issues Video

June 2, 2009 by  
Filed under Featured, National

While updating our twitter account today, we noticed a fun article written by Aubrey Cohen titled, “The greatest threat to our planet is cul-de-sacs!”  The article and its video has also created some heated commentary, including one unregistered user who offered a drink of their Kool-Aid after making this statement:

“New urbanism is just another way to get tax money. Cram in more lots, sell more units and collect more property tax. The B & O tax also pits municipalities against each other. As with everything, it’s all about the money. I don’t understand how all the libtards in Seattle can be so stupid. Environmentalism is the new facism.”

Blog comments sure can attract some thirsty folks sometimes!  Anyhow, here’s the video (also with interesting comments) that ended up also being the winner of The Congress for New Urbanism CNU 17 video contest:

New Stimulus Package: Part III – Neighborhood Stabilization

March 5, 2009 by  
Filed under Featured, Finance, National

The neighborhood stabilization provision includes an additional $2 billion to the $4 billion in grants for states and localities to purchase and redevelop foreclosed properties.  Although our downtown market has not been too affected by foreclosures like the rest of the nation, the intention is to establish financing mechanisms for purchase and redevelopment of foreclosed homes–which does in fact affect the overall stability of our market.

The great thing about this provision is that after purchase, these homes must be used to assist buyers at or below 120 percent of the area’s median income.  25 percent of funds must be used for households with incomes at or below 50 percent of an area’s median income and must be committed within 18 months of receipt.

Essentially, this provision can really make a difference in those neighborhoods where an entire community has been decimated by foreclosures, and restablish an area’s perceived value.

New Stimulus Package: Part II – FHA, Freddie, & Fannie Loan Limits

March 2, 2009 by  
Filed under Featured, Finance, National

The bill regarding FHA, Fannie Mae, and Freddie Mac loan limits has extended its expiration to December 31st, 2009 and increased limits to 125 percent of a local market’s median home price.  In King County, the $417,000 loan limit for FHA has been reported to increase to $567,500 and the GSE loan limit to $567,500.

California had the only three metro regions where the loan limits reached their cap of $729,759.

This provision should lower the cost of home buying or refinancing since it’s favored by investors, but it could be argued that raising the limits just inflates home prices even further–hurting the GSE mission of bringing affordable housing to low- middle -income families.

New Stimulus Package: Part I – Homebuyer Tax Credit

February 25, 2009 by  
Filed under Featured, Finance, National

Now that the dust has settled, Congress has voted, and the decisions has been made, questions about the new stimulus package can finally be answered.  Since there were several provisions made, we’re breaking up the stimulus into 10 parts over the next week or two.  Here’s what areas of the stimulus has been revised/improved.

  • Homebuyer Tax Credit
  • FHA, Fannie Mae and Freddie Mac Loan Limits
  • Neighborhood Stabilization
  • Commercial Real Estate
  • Rural Housing Service
  • Low Income-Housing Grants
  • Tax Exempt Housing Bonds
  • Energy Efficient Housing Tax Credits & Grants
  • Transportation Investments
  • Broadband Deployment

Homebuyer Tax Credit

This provision is very exciting for first-time buyers in that the credit has been increase from $7,500 to $8,000, and the credit does not require repayment.  Most importantly, anyone wanting to take advantage of the first-time homebuyer credit must do so before December 1st, 2009.  The National Association of Realtors (NAR) did make a run at making the credit $15,000, but it was considered “too rich for this program.”  Here are a list of FAQ’s provided by NAR.

homebuyer_stimulus_chart

1. What’s this new homebuyer tax incentive for 2009?

The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount.  If the house costs less than $80,000, the credit will be 10% of the cost.  Thus, if an individual purchased a home for $75,000, the credit would be $7500.  It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?

Only first-time homebuyers are eligible.  A person is considered a first-time buyer if they have not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?

Every dollar of a tax credit reduces income taxes by a dollar.  Credits are claimed on an individual’s income tax return.  Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due.  Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill.  So, if before taking any credits on a tax return a person has total tax liability of $9,500, an $8,000 credit would wipe out all but $1,500 of the tax due ($9,500 – $8000 = $1500).

4. So what happens if the purchaser is eligible for an $8,000 credit but their entire income tax liability for the year is only $6,000?

This tax credit is what’s called “refundable” credit.  Thus, if the eligible purchaser’s total tax liability was $6,000, the IRS would send the purchaser a check for $2,000.  The refundable amount is the difference between $8,000 credit amount and the amount of tax liability ($8000 – $6000 = $2000).  Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. Is there an income restriction?

Yes.  The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return.  Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000.  Married couples who file a Joint return may have income of no more than $150,000.

6. How is my “income” determined?

For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return.  AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements.  AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

7. What if I worked abroad for part of the year?

Some individuals have earned income and/or receive housing allowances while working outside the US.  Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI).  Their eligibility for the credit will be based on their MAGI.

8. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

Not always.  The credit phases-out between $75,000 – $95,000 for singles and $150,000 – $170,000 for married filing joint.  The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit.  Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).  For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown: couple’s income $165,000 income limit 150,000 excess income $15,000 the excess income amount ($15,000 in this example) is used to form a fraction.  The numerator of the fraction is the excess income amount ($15,000).  The denominator is $20,000 (specified by the statute).  In this example, the disallowed portion of the credit is 75% of $8,000, or $6,000 ($15,000/$20,000 = 75% x $8000 = $6000).  Stated another way, only 25% of the credit amount would be allowed.  In this example, the allowable credit would be $2000 (25% x $8000 = $2000).

9. What’s the definition of “principal residence?”

Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%).  It is also defined as “owner-occupied” housing.  The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling.  Even some houseboats or manufactured homes count as principal residences.

10. Are there restrictions on the location of the property?

Yes.  The home must be located in the United States.  Property located outside the US is not eligible for the credit.

11. Are there restrictions related to the financing for the mortgage on the property?

In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit.  Congress eliminated the financing restriction that applied in 2008 (in 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds).  Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser (mortgage revenue bonds are tax-exempt bonds issued by a state housing agency–proceeds from the bonds must be used for below market loans to qualified buyers).

12. Do I have to repay the 2009 tax credit?

No.  There is no repayment for 2009 tax credits.

13. Do 2008 purchasers still have to repay their tax credit?

Yes.  The $7,500 credit in 2008 was more like an interest-free loan.  All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

14. How do I apply for the credit?

There is no pre-purchase authorization, application or similar approval process.  All eligible purchasers simply claim the credit on their IRS Form 1040 tax return.  The credit will be reflected on a new Form 5405 that will be attached to the 1040.  Form 5405 can be found at www.irs.gov.

15. So I can’t use the credit amount as part of my downpayment?

No.  Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

16. So there’s no way to get any cash flow benefits before I file my tax return?

Yes.  Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments.  Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer.  In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

17. What if I purchase later this year but can’t get to settlement before December 1?

The credit is available for purchases before December 1, 2009.  A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser.  Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

18. I haven’t even filed my 2008 tax return yet.  If I buy in 2009, do I have to wait until next year to get the benefit of the credit?

You’ll have a helpful choice that might speed up the process.  Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008.  Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009.  They actually have three filing options.

  • If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8,000 credit on the 2008 return due on April 19.
  • They can extend their 2008 income-tax filing until as late as October 15, 2009 (the IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension).
  • If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X (form 1040X is available at www.irs.gov).  Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

20. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7,500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7,500 credit?

No, you would qualify for the $8,000 credit.  Eligible purchasers who have already claimed the $7,500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

21. If I claim my 2009 $8,000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?

No.  Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

22. I made an eligible purchase of a principal residence in May 2008 and claimed the $7,500 credit on my 2008 tax return.  My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in.  Will he qualify for the $8,000 credit, as well?

No.  Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit.  Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

23. I live in the District of Columbia.  If I qualify as a first-time homebuyer, can I use both the $5,000 DC credit and the $8,000 credit?

No; double dipping is not allowed. You would be eligible for only the $8,000 credit.  This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8,000 credit are somewhat more easily satisfied than the DC credit.

24. I know there is no repayment requirement for the $8,000 credit.  Will I ever have to repay any of the credit back to the government?

One situation does require a recapture payment back to the government.  If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it.  A few exceptions apply.  Note that this same 3-year recapture rule applies, as well, to the $7,500 credit available for 2008.  This provision is designed as an anti-flipping rule.

25. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?

The repayment rules are eased for many circumstances.  If the homeowner who used the credit dies within the first three years of ownership, there is no recapture.  Special rules make adjustments for people who sell homes as part of a divorce settlement, as well.  Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

26. I have a home under construction.  Am I eligible for the credit?

Yes, so long as you actually occupy the home before December 1, 2009.  WITHHOLDING EXAMPLES: Note: The impact of estimated tax payments would be the same.

Situation 1:  Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year.  When she fills out her 1040, her liability is $6,000.  She has had $6,000 withheld from her paycheck.  She also qualifies for the $8,000 homebuyer credit.
Result: Sally’s withholding satisfies her tax liability and reduces it to zero.  She will receive a refund of the full $8,000.

Situation 2: Nick and Nora file a joint return.  Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary.  When they compute their taxes, their combined withholding and estimated tax payments are $11,000.  Their income tax liability is $9,800.  They also qualified as first-time homebuyers and are eligible for the $8,000 refundable tax credit.
Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1,200 ($11,000 – $9,800 = $1,200).  Because they are eligible for the refundable tax credit as well, they will receive a refund of $9,200 ($1,200 income tax refund + $8,000 refundable tax credit = $9,200)

Situation 3: Cesar and LuzMaria both have income taxes withheld from their salaries and file a joint return.  When they file their income tax return, their combined withholding is $5,000.  However, their total tax liability is $7,200, generating an additional income tax liability of $2,200 ($7,200 – $5,000).  They also qualify for the $8,000 first-time homebuyer tax credit.
Result: Cesar and LuzMaria have been under-withheld by $2,200.  Ordinarily, they would be required to pay the additional $2,200 they owe (plus any applicable interest and penalties).  Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2,200 additional liability.  In addition, they will receive an income tax refund of $5,800 ($8,000 – $2,200 = $5,800).  If they owed penalties and/or interest, that amount would reduce the refund.

Everything You Wanted to Know About the Current Financial/Economic Crisis

December 6, 2008 by  
Filed under Finance, MARKET TRENDS, National

The Bravern Residence in Bellevue hosted an intimate educational seminar for the areas top agents this morning with keynote speaker Professor Michael Palmer. On the way there during our carpool, we wondered if this was going to be a sales pitch on how great the market is and why buyers should buy at Bravern.  However, it wasn’t.  The guest speaker and professor of finance with Leeds School of Business (University of Colorado) delivered an informative 2-hour presentation on the national and global economy whereby he discussed the past, present, and future.  Mr. Palmer addressed issues such as the sub-prime market, Greenspan’s push on rates, consumer confidence/spending, unemployment rates, and of course his prediction on how much longer we should expect this recession to last.

According to Mr. Palmer, the economy got into this mess by creating unsustainable bubbles which were created between 2002 and 2006 by over stimulation (monetary & fiscal).  As a result, the housing bubble was the first to burst.  Statistics on foreclosures were presented to support this idea, although it’s not really any new news.

  • Foreclosures in 3rd Quarter ’06:  223,223
  • Foreclosures in 3rd Quarter ’07:  446,726 (+100%)
  • Foreclosures in 3rd Quarter ’08:  765,558 (+71%) and the highest since records began in January 2005.

In addition to the slide of home prices, the world has been affected by other factors which were identified as:

  • Fannie Mae/Freddie Mac bailout on Sept. 8th
  • Lehman Brothers failure  on Sept. 12th
  • Merrill Lynch take-over by B of A on Sept. 15th
  • AIG $85 billion rescue plan on Sept. 16th
  • Washington Mutual take-over by JP Morgan on Sept 25th
  • Federal Reserve rescue of commercial paper markets on Oct. 7th

Palmer also discussed how household debt has skyrocketed and personal savings have plummeted — creating a even stronger decline in consumer confidence.

palmer_debt

palmer-consumer

Another interesting topic was the feds lowering of interest rates and how the intention of doing so is to fuel consumer confidence.  However, Palmer states that, “While lower interest rates might make us feel better — they have done little up to now to stimulate buying or lending or to restore confidence.”  Most importantly to note was that lending institutions appear to have no tolerance for risk.  The money pumped into system from the  feds appear to not being trickling down to public quite yet.  Instead, it appears that lending institutions are placing money into secure investments to shore up assets rather than take the risk at lending.  This is displayed below (notice how little return they’re willing to except rather than taking any risk at higher returns):

Early Nov. to Dec. 4, 2008

Early Nov. to Dec. 4, 2008 - (

But, what kind of Realtor would we be if we didn’t end with the good news?  Palmer’s prediction is that the nation will experience an 18-month recession.  Since the nation began experiencing it’s recession in December of ’07, Palmer pointed out that we’re already 12 months in with U.S. history showing an average of 13 months for previous economic troubles since 1900.  That would place an expected recovery by the 2nd or 3rd quarter of ’09.   However, since these predictions are national, Palmer communicated a more probable rebound happening sooner for Seattle based on a number of factors including our employers (Microsoft, Boeing, Expedia, Amazon, etc.) and the metropolitan area being the fourth largest export market in the nation with Japan, China, and Canada.

palmer_recessionhistory

View Michael Palmer’s complete slide presentation.

Survey Suggests Seller Pricing Contributing to Market Slowdown

October 30, 2008 by  
Filed under National

It appears that there is a lack of sellers coming to grips with reality when it comes to their homes true market value.  According to a recent survey from October 7th to October 9th by Zillow, 49% of homeowners show that they still believe their home’s value has either increased or stayed the same over the past year.

Homeowner Perception vs. Reality

In reality, 74% percent of homes have lost value in the past 12 months, according to preliminary findings in Zillow’s Q3 Real Estate Market Reports, which will be released Nov. 12.

Homeowner Perception vs. Reality: Q3 and Future Outlook

Perception of Homeowner Change in Last Year

Perception of Homeowner Change in Last Year

Outlook for Own Home Next 6 Months

Outlook for Local Market Next 6 Months

Read the rest of this article.

*Homeowner perception was obtained through a survey conducted online by Harris Interactive within the United States on behalf of Zillow.com between October 7, 2008 and October 9, 2008, among 1,388 adults ages 18+ who own a home.  Actual percent of homes is as of the third quarter 2008 and represents the actual number of homes that increased, decresed or stayed the same.

October Interest Rate History for 30-Year Fixed

October 22, 2008 by  
Filed under National

Interest Rates from 1978 to 2008

click to enlarge

click to enlarge

Provided by
Madeline Childers
Senior Account Manager
206-387-3325
northpoint escrow + title

New Housing & Economic Recovery Act Provides New Market Stability

July 31, 2008 by  
Filed under Finance, National

The President signed into law the long-awaited Housing and Economic Recovery Act of 2008.  The housing bill is very broad and affects the GSEs (Fannie Mae and Freddie Mac) and FHA.  It makes permanent many of the changes put in place as part of the Economic Stimulus Act passed earlier this year, most importantly a permanent increase in conforming conventional and FHA loan limits.  It also provides tax incentives for first-time homebuyers, provides financial support for modernization of FHA, and has several provisions to strengthen and reform Fannie and Freddie.

Outlined below the key changes that will affect borrowers. Some of the provisions go into effect immediately, and others on October 1, 2008 or January 1, 2009.

Higher Loan Limits – Raises Fannie Mae and Freddie Mac and FHA single family loan limits on a permanent basis.  The bill sets the GSE loan limit for single family one-unit properties at the greater of $417,000 (with increased limits for other single family properties up to four units) of 115 percent of the local area median home price, as determined by HUD, up to a cap of 150 percent of the GSE limit of $417,000 for a one-unit property or $625,500 in high cost areas.   The new loan limits will go into effect on January 1, 2009 after the limits in the Economic Stimulus Act expire on December 31, 2008.  They will be lower than those set by the Economic Stimulus Act which used 125 percent of median, but they will still be significantly higher than the old limits in most areas, and they will be permanent.  For example, in King, Pierce, and Snohomish counties the new limits will be $522,100 under the new bill.  We will distribute the new maximum loan limits as soon as they are published.

Tax Incentives – Establishes a first-time homebuyer tax credit of up to $7,500.  The credit will be for home purchases from April 9, 2008 through June 30, 2009.  There are income limits of $75,000 for an individual qualifying as a first-time homebuyer (i.e., has not owned a home in the last three years) and $150,000 for a family.  The tax credit has to be repaid over 15 years, making it a tax-free loan.  We will provide more details on this in the near future.

FHA Changes – The bill includes several significant provisions related to FHA, beyond the higher loan limits mentioned above.

Cash Investment Requirement – The cash investment requirement for FHA transactions will be set at 3.5 percent.  While the exact timing is yet to be announced, it is expected that this will be effective very soon.

Seller-funded Down Payment Assistance – Down payment assistant programs involving sellers or third parties (e.g. Nehemiah) will no longer be accepted on FHA loans as of October 1, 2008.  (Borrowers must be approved on or before September 30).

Risk-based Pricing Moratorium – A moratorium on risk-based pricing based on FICO scores will be imposed for one year beginning on October 1, 2008.

FHA Modernization – Provides financial resources for modernizing and streamlining the FHA loan process.  Most notably, the bill gives FHA authority to streamline condominium approval.  This should make it much easier to provide FHA loans to purchasers of condo units.  Details on this will follow, so we don’t know anything yet.

FHA Rescue Plan (foreclosure relief) – Authorizes a new FHA “Home for Homeowners Program” to refinance existing borrowers into fixed rate FHA mortgage products.

VA Loan Limit will increase

GSE Regulatory Reform – The bill strengthens regulation of Fannie Mae and Freddie Mac through creation of a strong new regulator.

GSE Stabilization – Establishes several new powers and grants authority to stabilize the GSEs in the event of a financial crisis.

This is a very important piece of legislation for the housing market.  It will help stabilize and restore confidence in Fannie Mae and Freddie Mac.  It will also expand borrower access to mortgage credit at the most favorable price and terms through conforming conventional and FHA loans on a permanent basis.  And when FHA completes changes to its condominium eligibility requirements it should open up many more condo projects to FHA financing.

These provisions should help sell houses/condos again, and give us stable loan programs for borrowers.  FHA is gaining market share, and will provide more information as it rolls out.

Seattle Mentioned on Forbes Regarding America’s Recession

June 5, 2008 by  
Filed under City of Seattle, National

seahawks defenseWe’re always looking to promote consumer confidence in our local real estate market. However, this season has been slower for real estate than previous years. We’re not seeing the 14% appreciation we saw in ’07, homes are staying on the market longer than the traditional average, and open houses have become more an opportunity to read a book. In addition (or as a result of), national news headlines are constantly reporting that the sky is falling, unemployment is up, and home prices are yet down again.

So, in an ongoing search to find hard data that Seattle is still an exception, we were handed an article from Forbes which has compiled a list of the nation’s most recession-proof cities. Seattle placed #8 based on data from the U.S. Bureau of Labor Statistics for the year ending in February 2008, and median home price data from the National Association of Realtors to see which areas posted the largest annual gains.

The region around Puget Sound is home to Microsoft, Amazon.com, Starbucks, Costco, Nordstrom and Washington Mutual. What’s more, home prices are only half that in the San Francisco Bay Area, and unemployment in the region is falling. Of the 50 largest metropolitan statistical areas in the U.S., Seattle had the strongest growth in manufacturing in the past year.

While national statistics, local population increases, low unemployment rate, and developer’s desire to build in Seattle prove to boost the city’s reputation, Forbes does point out the bad mortgages everybody got into.

  1. Oklahoma City, Oklahoma
    Median home price: +8.2%
    Unemployment: 3.5% (from 4.7% in February 2007)
    Key growth: Leisure and hospitality, +6%; construction +11.5% from 2007
  2. San Antonio, Texas
    Median home price: +7.9%
    Unemployment: 4% (from 4.3%)
    Key growth: Construction, +6.3%; leisure and hospitality, +4.9%
  3. Austin, Texas
    Median home price: +6.4%
    Unemployment: 3.6% (from 3.8%)
    Key growth: Natural resources and construction, +5.1%; leisure and hospitality, +5.3%
  4. San Jose, California
    Median home price: +11.2%
    Unemployment: 5.2% (from 4.7%)
    Key growth: Information, +4.5%
  5. Raleigh, North Carolina
    Median home price: +4%
    Unemployment: 4.2% (from 3.7%)
    Key growth: Professional and business Services, +7.4%; education and health, +6%
  6. Salt Lake City, Utah
    Median home price: +2.5%
    Unemployment: 3.1% (from 2.6%)
    Key growth: Education and health services, +5.5%
  7. Houston, Texas
    Median home price: +1.1%
    Unemployment: 4.2% (from 4.5%)
    Key growth: Natural resources, +5.9%; construction, +4.7%
  8. Seattle, Washington
    Median home price: +1.2%
    Unemployment: 4.3% (from 4.5%)
    Key growth: Leisure and hospitality, 4.1%; manufacturing, +2.6%
  9. Charlotte, N.C.
    Median home price: +3.3%
    Unemployment: 5.4% (from 4.7%)
    Key growth: Professional and business services, +4.7%; leisure and hospitality, +4.2%
  10. Dallas-Fort Worth, Texas
    Median home price: +.5%
    Unemployment: 4.3% (from 4.5%)
    Key growth: Education and health, +5.6%

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