Special Web Section Unveiled for Homeowners Who Lose Homes; Foreclosure Tax Relief Available to Many (IR-2007-159, Sept. 17, 2007)
WASHINGTON — The Internal Revenue Service unveiled a special new section today on IRS.gov for people who have lost their homes due to foreclosure. The IRS also reassured homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.
The new section of IRS.gov includes a variety of information, including a worksheet designed to help borrowers determine whether any of the foreclosure-related relief provisions apply to them. For those taxpayers who find they owe additional tax, it also includes a form they can use to request a payment agreement with the IRS. . In some cases, eligible taxpayers may qualify to settle their tax debt for less than the full amount due using an offer-in-compromise.
The IRS urges struggling homeowners to consider their options carefully before giving up their homes through foreclosure. For more information visit the Internal Revenue Service website at www.irs.gov.
Monday, September 24, 2007
Friday, September 21, 2007
Credit Score Changes Ahead
For years, people have added the names of their relatives to their credit cards as a way to help boost their own credit score and establish a credit history. That practice is coming to a halt.
Once the change goes into effect, buyers will no longer get any value out of being an authorized user on someone else's credit card.
Young people trying to establish or re-establish credit may have to depend on secured credit cards or other non-prime credit products to establish credit.
It is quite possible that your credit scores could go down significantly because of this change.
If you are getting married soon and were planning to close credit card accounts and be added as an authorized user on your spouse's credit card, it is a good idea to rethink that move.
If you are married where one spouse does not have any credit cards on which they are the primary cardholder or a joint cardholder, they may need to open one or two in their own name now.
Women, more than men, will be negatively impacted because they are more likely to be added as an authorized user.
Fair Isaac developed the FICO credit-scoring system used by the nation's three credit-scoring agencies. One agency is expected to start using the new system this month, and the two other agencies are expected to start using it by the middle of next year.
Once the change goes into effect, buyers will no longer get any value out of being an authorized user on someone else's credit card.
Young people trying to establish or re-establish credit may have to depend on secured credit cards or other non-prime credit products to establish credit.
It is quite possible that your credit scores could go down significantly because of this change.
If you are getting married soon and were planning to close credit card accounts and be added as an authorized user on your spouse's credit card, it is a good idea to rethink that move.
If you are married where one spouse does not have any credit cards on which they are the primary cardholder or a joint cardholder, they may need to open one or two in their own name now.
Women, more than men, will be negatively impacted because they are more likely to be added as an authorized user.
Fair Isaac developed the FICO credit-scoring system used by the nation's three credit-scoring agencies. One agency is expected to start using the new system this month, and the two other agencies are expected to start using it by the middle of next year.
Tuesday, September 18, 2007
FED Lowers Federal Funds Rate
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.
Monday, September 17, 2007
Financial Tips for Home Owners in Santa Cruz
There is no better time than the present for homeowners to examine the situation that they are in today. Whether you are selling your home or not you should review the details of your present mortgage(s). I have found that many homeowners do not have a clear idea of the specifics of their own mortgages.
Here are some of the questions you should be asking yourself: What is my rate and when will it be changing? What will my payments increase to when my rate changes? If your loan has an ‘interest-only’ minimum payment period, when will that period come to an end and what will my payments increase to at that point? Do I have a pre-payment penalty and, if so, how much is it and when does it phase out?
Those who have an adjustable rate mortgage with the potential for negative amortization need to have a clear understanding of its terms and pay special attention to upcoming payment changes. If your mortgage balance has been increasing because you have just been making the minimum payment, when will your loan recast and what will your payments increase to at that point? If in doubt of exactly what your note says, seek the advice of a seasoned mortgage professional to help you understand your current mortgage.
Today, more than ever, homeowners who are planning on selling their homes need to be realistic about their timeframe for moving. The combination of a record number of homes listed for sale and a tightening of lender’s underwriting guidelines is slowing home sales and forcing sellers to make some tough decisions.
Sellers must clearly understand the fine print in their mortgages. Those who need to sell because their payments are going to be adjusting beyond the affordability range cannot afford the luxury of waiting until a buyer comes along to give them the price that their home was worth last year or the year before, when property values were stronger. Sellers are well advised to put the importance of protecting their credit over protecting their equity because if they fail to sell their homes in time both their credit and equity could suffer. The government is not likely to come up with a bail-out program in time for homeowners who are in trouble now.
Besides being practical about the asking price (and ‘staging’ their home), sellers can help themselves by offering to pay up to 6 percent of the sales price in buyer’s closing costs. This can be an effective way of permanently lowering the buyers’ interest rate and their payments. Sellers can also offer to loan their buyers money by providing a second mortgage. For example, a buyer with 10 percent down may obtain an 80 percent conventional mortgage and combine it with a 10 percent mortgage from the seller. This kind of arrangement will work in certain situations and can make it easier for buyers to buy their home.
The good news is that rates are good, homes are selling and there are plenty of qualified buyers who want to live in Santa Cruz County who are looking for good
deals.
------------------
Presented on behalf of Brent Dunton
Certified Mortgage Planner, Santa Cruz Home Finance
Here are some of the questions you should be asking yourself: What is my rate and when will it be changing? What will my payments increase to when my rate changes? If your loan has an ‘interest-only’ minimum payment period, when will that period come to an end and what will my payments increase to at that point? Do I have a pre-payment penalty and, if so, how much is it and when does it phase out?
Those who have an adjustable rate mortgage with the potential for negative amortization need to have a clear understanding of its terms and pay special attention to upcoming payment changes. If your mortgage balance has been increasing because you have just been making the minimum payment, when will your loan recast and what will your payments increase to at that point? If in doubt of exactly what your note says, seek the advice of a seasoned mortgage professional to help you understand your current mortgage.
Today, more than ever, homeowners who are planning on selling their homes need to be realistic about their timeframe for moving. The combination of a record number of homes listed for sale and a tightening of lender’s underwriting guidelines is slowing home sales and forcing sellers to make some tough decisions.
Sellers must clearly understand the fine print in their mortgages. Those who need to sell because their payments are going to be adjusting beyond the affordability range cannot afford the luxury of waiting until a buyer comes along to give them the price that their home was worth last year or the year before, when property values were stronger. Sellers are well advised to put the importance of protecting their credit over protecting their equity because if they fail to sell their homes in time both their credit and equity could suffer. The government is not likely to come up with a bail-out program in time for homeowners who are in trouble now.
Besides being practical about the asking price (and ‘staging’ their home), sellers can help themselves by offering to pay up to 6 percent of the sales price in buyer’s closing costs. This can be an effective way of permanently lowering the buyers’ interest rate and their payments. Sellers can also offer to loan their buyers money by providing a second mortgage. For example, a buyer with 10 percent down may obtain an 80 percent conventional mortgage and combine it with a 10 percent mortgage from the seller. This kind of arrangement will work in certain situations and can make it easier for buyers to buy their home.
The good news is that rates are good, homes are selling and there are plenty of qualified buyers who want to live in Santa Cruz County who are looking for good
deals.
------------------
Presented on behalf of Brent Dunton
Certified Mortgage Planner, Santa Cruz Home Finance
Wednesday, September 12, 2007
Lowering your tax bill
Newspapers in California are presenting daily dire and foreboding updates about foreclosures and short sales. Yes, Dorothy and Toto, this doesn’t look like California anymore. Many homeowners are facing Notice of Defaults and Trustee Sales and these are major problems for everyone involved. However, there is another aspect of the market worth discussing for homeowners with equity in their properties.
As more Short Sales are recorded and more REO properties are sold by the lenders, comparable prices will be dropping below the prices paid for the properties in the near past. Statisticians and pundits keep saying, "The median prices haven’t dropped much from one year ago." Try telling that to someone who paid $600,000 for a home eighteen months ago and now finds comparable homes in their tract selling for $500,000. However, there might be a small rainbow in the storm for some.
Do you have any ideas for people who have purchased recently in an area where prices have dropped? How about recommending to them that they request a lowering of their Property Tax Assessment and temporarily lowering their tax bill?
The best sources for information on this subject is your Local County Assessor. I was so fortunate recently to have a comprehensive interview with Greg Smith, the legendary Assessor, County Recorder and County Clerk of San Diego County who has served his County in different capacities since 1977. Following are excerpts from that session.
Q. If prices have recently fallen in an area, what are a taxpayer’s options?
A. There are two methods of reassessments. One is an Informal Request for Review and if no agreement can be reached, then a Formal Appeal can be filed.
Q. What are the time factors for these options?
A. In San Diego County, the Informal Reviews must be filed between January 1st and June 1st, and Formal Assessment Appeals must be filed between July 2nd and November 30th. Be advised that other Counties have different deadlines.
Q. What is the policy of your office on these appeals?
A. Our goal is to appraise the property at its current fair market value prior to completing our annual assessment roll. If the taxpayer disagrees with this value, they must file an Assessment Appeal within the above mentioned dates. After an Assessment Appeal is filed, our office reviews all the information provided by the taxpayer and attempts to reach an agreed upon value with the taxpayer. Very few of the appeals in our County go to a formal hearing before our Assessment Appeals Board.
Q. What is the cost of the filing?
A. There is no cost to file an assessment appeal.
Q. Who might consider filing either an Informal Review or Formal Appeal?
A. Anyone who has recently purchased a property where the comparable resale prices in the area have dropped, or anyone who feels that the current assessed value of their home is higher than the current market value of their home.
Q. What is Proposition 8?
A. It seems that everyone knows about Proposition 13. Another important State Law (Proposition 8) states, “If the current market value of your property falls below the assessed or taxable value as shown on your tax bill, the Assessor’s Office is required to temporarily lower the assessment.” You can get a copy of an “Application for Review of Assessment Form” by calling the Clerk’s office at 619 531 5777. It is a simple form where the taxpayer indicates their opinion of value and provides supporting documentation such as sales of comparable properties, or a recent appraisal.
Q. What does the phrase “temporarily” mean?
A. In times of dropping real estate prices, a taxpayer’s property tax assessment must be lowered according to Proposition 8 if the current market value is less than the assessed value as shown on the tax bill. Each year the taxpayer’s assessment will be reviewed until such time that the previously assessed value, plus the compounded annual 2% Consumer Price Index (CPI) factor, as required by Proposition 13, has been fully restored. As the market “turns around” and values increase, the assessment of the property will also be increased. Under no circumstances, however, can this increase in value exceed the original assessed value (plus the annual 2% CPI factor). Once the previous value is fully restored, the annual increase is then limited to the 2% CPI factor as required by Proposition 13. Therefore, taxpayers never lose their Proposition 13 rights under Proposition 8.
Q. Does a taxpayer need an attorney or consultant to do this appeal?
A. No. Many taxpayers file their own appeals successfully. In fact, our office is required by State law to keep a list of recent home sales for the last two years. Other supporting data can easily be obtained from an appraiser or local realtor.
Q. I heard a rumor about an Orange County lawsuit on this subject.
A. Someone filed a lawsuit claiming that lowered assessments could not be raised by more than 2% per year. This lawsuit was not successful. Under Proposition 8, the temporary reduction must be reviewed each year, and the property must be valued at the current market value. The maximum 2% annual CPI factor does not apply to properties temporarily lowered under Proposition 8 when their indexed base year values are being reinstated.
Q. We have been talking about homes. Can a mobile home owner file a Review Request?
A. Yes.
Q. Any final thoughts?
A. I believe Proposition 8 is very fair. Proposition 8 allows the Assessor’s Office to provide, temporarily, necessary relief to owners whose property values have declined, while still retaining the ability to review and increase those values when market conditions improve.
My final thoughts after this discussion. First, I want to thank Greg Smith and Dave Butler of the San Diego Assessor’s Office for their patience and taking the time to educate me. By the way, if you ever get the chance to attend a Greg Smith seminar, run, don’t walk to the session. I’ve had the pleasure of hearing him many times and he makes his bureaucratic subject interesting and his humorous delivery is exemplary. Also, it has been an added pleasure to have his ever-charming wife as a student at my seminars.
While it is too late to ask for an Informal Review, people can still file a Formal Appeal. Real estate professionals should recommend immediately that friends, associates, clients, etc. who recently purchased property evaluate their current property assessments and consider an appeal. For example, Orange County and some other Counties have a September 17th deadline for filing a Formal Appeal this year so residents in those counties must move fast.
Any tax reduction under Proposition 8 is temporary but temporary means you can save real dollars for a specific period of time, and I strongly believe that is better than doing nothing. Who knows in the overall scheme of things when prices will swing upward again? Do something now; your friendly local Assessors are waiting to hear from you.
----------------
With permission of Duane Gomer
Duane Gomer Inc, Duane Gomer Inc.
23312 Madero Suite J
Mission Viejo, CA 92691
As more Short Sales are recorded and more REO properties are sold by the lenders, comparable prices will be dropping below the prices paid for the properties in the near past. Statisticians and pundits keep saying, "The median prices haven’t dropped much from one year ago." Try telling that to someone who paid $600,000 for a home eighteen months ago and now finds comparable homes in their tract selling for $500,000. However, there might be a small rainbow in the storm for some.
Do you have any ideas for people who have purchased recently in an area where prices have dropped? How about recommending to them that they request a lowering of their Property Tax Assessment and temporarily lowering their tax bill?
The best sources for information on this subject is your Local County Assessor. I was so fortunate recently to have a comprehensive interview with Greg Smith, the legendary Assessor, County Recorder and County Clerk of San Diego County who has served his County in different capacities since 1977. Following are excerpts from that session.
Q. If prices have recently fallen in an area, what are a taxpayer’s options?
A. There are two methods of reassessments. One is an Informal Request for Review and if no agreement can be reached, then a Formal Appeal can be filed.
Q. What are the time factors for these options?
A. In San Diego County, the Informal Reviews must be filed between January 1st and June 1st, and Formal Assessment Appeals must be filed between July 2nd and November 30th. Be advised that other Counties have different deadlines.
Q. What is the policy of your office on these appeals?
A. Our goal is to appraise the property at its current fair market value prior to completing our annual assessment roll. If the taxpayer disagrees with this value, they must file an Assessment Appeal within the above mentioned dates. After an Assessment Appeal is filed, our office reviews all the information provided by the taxpayer and attempts to reach an agreed upon value with the taxpayer. Very few of the appeals in our County go to a formal hearing before our Assessment Appeals Board.
Q. What is the cost of the filing?
A. There is no cost to file an assessment appeal.
Q. Who might consider filing either an Informal Review or Formal Appeal?
A. Anyone who has recently purchased a property where the comparable resale prices in the area have dropped, or anyone who feels that the current assessed value of their home is higher than the current market value of their home.
Q. What is Proposition 8?
A. It seems that everyone knows about Proposition 13. Another important State Law (Proposition 8) states, “If the current market value of your property falls below the assessed or taxable value as shown on your tax bill, the Assessor’s Office is required to temporarily lower the assessment.” You can get a copy of an “Application for Review of Assessment Form” by calling the Clerk’s office at 619 531 5777. It is a simple form where the taxpayer indicates their opinion of value and provides supporting documentation such as sales of comparable properties, or a recent appraisal.
Q. What does the phrase “temporarily” mean?
A. In times of dropping real estate prices, a taxpayer’s property tax assessment must be lowered according to Proposition 8 if the current market value is less than the assessed value as shown on the tax bill. Each year the taxpayer’s assessment will be reviewed until such time that the previously assessed value, plus the compounded annual 2% Consumer Price Index (CPI) factor, as required by Proposition 13, has been fully restored. As the market “turns around” and values increase, the assessment of the property will also be increased. Under no circumstances, however, can this increase in value exceed the original assessed value (plus the annual 2% CPI factor). Once the previous value is fully restored, the annual increase is then limited to the 2% CPI factor as required by Proposition 13. Therefore, taxpayers never lose their Proposition 13 rights under Proposition 8.
Q. Does a taxpayer need an attorney or consultant to do this appeal?
A. No. Many taxpayers file their own appeals successfully. In fact, our office is required by State law to keep a list of recent home sales for the last two years. Other supporting data can easily be obtained from an appraiser or local realtor.
Q. I heard a rumor about an Orange County lawsuit on this subject.
A. Someone filed a lawsuit claiming that lowered assessments could not be raised by more than 2% per year. This lawsuit was not successful. Under Proposition 8, the temporary reduction must be reviewed each year, and the property must be valued at the current market value. The maximum 2% annual CPI factor does not apply to properties temporarily lowered under Proposition 8 when their indexed base year values are being reinstated.
Q. We have been talking about homes. Can a mobile home owner file a Review Request?
A. Yes.
Q. Any final thoughts?
A. I believe Proposition 8 is very fair. Proposition 8 allows the Assessor’s Office to provide, temporarily, necessary relief to owners whose property values have declined, while still retaining the ability to review and increase those values when market conditions improve.
My final thoughts after this discussion. First, I want to thank Greg Smith and Dave Butler of the San Diego Assessor’s Office for their patience and taking the time to educate me. By the way, if you ever get the chance to attend a Greg Smith seminar, run, don’t walk to the session. I’ve had the pleasure of hearing him many times and he makes his bureaucratic subject interesting and his humorous delivery is exemplary. Also, it has been an added pleasure to have his ever-charming wife as a student at my seminars.
While it is too late to ask for an Informal Review, people can still file a Formal Appeal. Real estate professionals should recommend immediately that friends, associates, clients, etc. who recently purchased property evaluate their current property assessments and consider an appeal. For example, Orange County and some other Counties have a September 17th deadline for filing a Formal Appeal this year so residents in those counties must move fast.
Any tax reduction under Proposition 8 is temporary but temporary means you can save real dollars for a specific period of time, and I strongly believe that is better than doing nothing. Who knows in the overall scheme of things when prices will swing upward again? Do something now; your friendly local Assessors are waiting to hear from you.
----------------
With permission of Duane Gomer
Duane Gomer Inc, Duane Gomer Inc.
23312 Madero Suite J
Mission Viejo, CA 92691
Friday, September 7, 2007
Santa Cruz County Real Estate Report for September 2007
HEADING TOWARDS THE END OF THE PRIME SELLING SEASON.........
Fortunately or unfortunately (depending on how you look at it), I see the local real estate market holding it's own. Sure the media is all doom and gloom, but the numbers don't lie. I believe most of what has been happening in the last few months is directly related to the mortgage industry blues. Some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment. Most problems are primarily with jumbo loans, but there are no serious problems for the majority of buyers who qualify for conventional financing. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.
Let's do a comparison of August from 2005 to 2006 to present. The total sales volume was down 21.9% from 2005 to 2006 and the same percentage for 2006 compared to today. But, the median price and the average sales price dropped only 2.1% from 2005 to 2006 and has increased 4.4% since 2006. Correct me if I am wrong in my thinking but I think prices are basically holding.
The percentage of households that could afford to buy an entry-level home in California stood at 24% in the second quarter of 2007, compared with 23% for the same period a year ago. This First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. At 45%, the High Desert region was the most affordable in the state, followed by the Sacramento region at 44%. Santa Barbara was the least affordable region in the state at 12%, followed by the Monterey region at 17%. No records were available for Santa Cruz.
The rate of mortgage loans entering the foreclosure process during the second quarter broke a new record nationally, the Mortgage Bankers Association said on 9/6/07. The rate of loans entering the foreclosure process hit a record 65%, compared with 58% during the previous quarter and 43% during the second quarter of 2006.
In releasing the results of its latest delinquency survey, the MBA said the record rate of loans entering the foreclosure process was driven by data from four states where investors and speculators were particularly active during the boom: California, Florida, Nevada and Arizona. These states have more than a third of the nation's subprime adjustable-rate mortgages (ARMs) and foreclosure starts on subprime ARMs, and are also responsible for most of the nationwide increase in foreclosures, the MBA said.
C.A.R. urges swift passage of GSE and conforming loan limit reform bill, calling for increases in loan limits to match median home prices in California and other high-cost areas and the creation of a new regulator to oversee Government Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac.
Vigorous support helped push the measure, HR 1427, through the House in May, but it has since stalled in the Senate. The bill would raise the current maximum size of a conforming mortgage loan from $417,000 to a capped amount at 150 percent of the national limit or $625,500, allowing low- and moderate-income home buyers in high-cost areas better access to low-cost, low-rate fixed mortgages.
C.A.R. President Colleen Badagliacco was recently quoted in a 'San Jose Mercury News' story on the issue, saying that a loan of $417,000 'may buy a mansion in Des Moines but it doesn't buy anything in San Jose.'
Here is what is happening in our local Santa Cruz County market, for other areas please give me a call.
----------------------------------------------------------------------
August Monthly Statistical Highlights for Single Family Homes:
* Inventory down 4.4% compared to August 2006, and slightly down 0.5% from July 2007
* Sales down 25.1% compared to August 2006, but only down 2.8% from July 2007
* Days on the market decreased to 73, month prior 88, last August at 81
* Median home price decreased just slightly from the prior month to $798,400, but increased 4.4% from August 2006
* Sales price vs.listing price ratio increased to 97.79% from July
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)
We are still looking at over 9 months of inventory on single family homes, which continues to make it a buyers market. There are some great opportunities for those looking for a primary residence, second home, or an investment property. If you know of anyone thinking of selling or looking to buy in the next 30-60 days, I would love to help them.
I hope you enjoy my monthly newsletter. Let me know if there are other facets of the market you would like information about.
Fortunately or unfortunately (depending on how you look at it), I see the local real estate market holding it's own. Sure the media is all doom and gloom, but the numbers don't lie. I believe most of what has been happening in the last few months is directly related to the mortgage industry blues. Some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment. Most problems are primarily with jumbo loans, but there are no serious problems for the majority of buyers who qualify for conventional financing. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.
Let's do a comparison of August from 2005 to 2006 to present. The total sales volume was down 21.9% from 2005 to 2006 and the same percentage for 2006 compared to today. But, the median price and the average sales price dropped only 2.1% from 2005 to 2006 and has increased 4.4% since 2006. Correct me if I am wrong in my thinking but I think prices are basically holding.
The percentage of households that could afford to buy an entry-level home in California stood at 24% in the second quarter of 2007, compared with 23% for the same period a year ago. This First-time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. At 45%, the High Desert region was the most affordable in the state, followed by the Sacramento region at 44%. Santa Barbara was the least affordable region in the state at 12%, followed by the Monterey region at 17%. No records were available for Santa Cruz.
The rate of mortgage loans entering the foreclosure process during the second quarter broke a new record nationally, the Mortgage Bankers Association said on 9/6/07. The rate of loans entering the foreclosure process hit a record 65%, compared with 58% during the previous quarter and 43% during the second quarter of 2006.
In releasing the results of its latest delinquency survey, the MBA said the record rate of loans entering the foreclosure process was driven by data from four states where investors and speculators were particularly active during the boom: California, Florida, Nevada and Arizona. These states have more than a third of the nation's subprime adjustable-rate mortgages (ARMs) and foreclosure starts on subprime ARMs, and are also responsible for most of the nationwide increase in foreclosures, the MBA said.
C.A.R. urges swift passage of GSE and conforming loan limit reform bill, calling for increases in loan limits to match median home prices in California and other high-cost areas and the creation of a new regulator to oversee Government Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac.
Vigorous support helped push the measure, HR 1427, through the House in May, but it has since stalled in the Senate. The bill would raise the current maximum size of a conforming mortgage loan from $417,000 to a capped amount at 150 percent of the national limit or $625,500, allowing low- and moderate-income home buyers in high-cost areas better access to low-cost, low-rate fixed mortgages.
C.A.R. President Colleen Badagliacco was recently quoted in a 'San Jose Mercury News' story on the issue, saying that a loan of $417,000 'may buy a mansion in Des Moines but it doesn't buy anything in San Jose.'
Here is what is happening in our local Santa Cruz County market, for other areas please give me a call.
----------------------------------------------------------------------
August Monthly Statistical Highlights for Single Family Homes:
* Inventory down 4.4% compared to August 2006, and slightly down 0.5% from July 2007
* Sales down 25.1% compared to August 2006, but only down 2.8% from July 2007
* Days on the market decreased to 73, month prior 88, last August at 81
* Median home price decreased just slightly from the prior month to $798,400, but increased 4.4% from August 2006
* Sales price vs.listing price ratio increased to 97.79% from July
-----------------------------------------------------------------------
(These statistics are believed to be accurate but not guaranteed)
We are still looking at over 9 months of inventory on single family homes, which continues to make it a buyers market. There are some great opportunities for those looking for a primary residence, second home, or an investment property. If you know of anyone thinking of selling or looking to buy in the next 30-60 days, I would love to help them.
I hope you enjoy my monthly newsletter. Let me know if there are other facets of the market you would like information about.
Payroll report suggests FED to begin easing monetary policy
This morning’s payroll report gives the Fed the cover it needs to begin easing monetary policy in a serious way, using the biggest guns in its arsenal. Any lingering fears on inflation are now firmly in the rearview mirror and the Fed’s objective to maintain economic growth is paramount. The bad news is the Fed now appears somewhat behind the curve as often happens in times of economic transition. There is now a real danger of recession, and some analysts will worry that one is now unavoidable, or even that we are in one already. We do not yet go that far. A recession is still avoidable in my opinion, but the Fed will need to act promptly and with authority to right this sinking ship.
Bulls may latch on to the fact that the unemployment rate held steady at 4.6 percent, but the household survey showed an even bigger drop in employment in August, down 316,000 jobs, so that shred of comfort is a statistical myth.
In the near-term expect economic and financial volatility is going to get ugly. A major slowdown in growth is not yet priced into equities; expect major cuts in analyst earnings estimates for the third and fourth quarters of this year. The Fed now has the evidence it needs to cut the Fed funds target rate at least 25 basis points in September. The Fed funds futures market is now placing higher odds on a 50 basis point cut. While the payroll data is just one data point for the Fed to consider, it is one that carries the most weight in the Fed’s eyes.
Scott Anderson, Ph.D., Senior Economist, Wells Fargo Bank
Bulls may latch on to the fact that the unemployment rate held steady at 4.6 percent, but the household survey showed an even bigger drop in employment in August, down 316,000 jobs, so that shred of comfort is a statistical myth.
In the near-term expect economic and financial volatility is going to get ugly. A major slowdown in growth is not yet priced into equities; expect major cuts in analyst earnings estimates for the third and fourth quarters of this year. The Fed now has the evidence it needs to cut the Fed funds target rate at least 25 basis points in September. The Fed funds futures market is now placing higher odds on a 50 basis point cut. While the payroll data is just one data point for the Fed to consider, it is one that carries the most weight in the Fed’s eyes.
Scott Anderson, Ph.D., Senior Economist, Wells Fargo Bank
Thursday, September 6, 2007
Pending Home Sales Index Falls Largely on Mortgage Tightening
Pending home sales, a forward-looking indicator, shows existing-home sales are likely to decline in coming months as mortgage disruptions work their way through the housing market, according to the National Association of Realtors®. The Pending Home Sales Index, based on contracts signed in July, fell 12.2% in July and was 16.1% lower than July 2006.
Lawrence Yun, NAR senior economist, said abnormal factors are clouding the horizon. “It’s difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment,” he said.
“These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.
“If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,” Yun said. The PHSI in the South was 15.2% below a year ago. In the Northeast, the index is 10% lower than July 2006. In the Midwest it dropped 13.1% and in the West, the index fell 20.8%.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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By permission of Walter Molony, Realtor.org
Lawrence Yun, NAR senior economist, said abnormal factors are clouding the horizon. “It’s difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren’t closing because mortgage commitments have been falling through at the last moment,” he said.
“These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans. Some consumer concerns remain, but since mid-August the market has been stabilizing somewhat.
“If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,” Yun said. The PHSI in the South was 15.2% below a year ago. In the Northeast, the index is 10% lower than July 2006. In the Midwest it dropped 13.1% and in the West, the index fell 20.8%.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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By permission of Walter Molony, Realtor.org
Avoiding Foreclosure
Few things are as devastating as losing your home. Sadly, it's not always inevitable. In many cases the foreclosure could've been avoided with some outside help. Be aware of some of the hidden difficulties that will arise if foreclosure occurs.
Finding a new home. Don't believe that it will be better to let the foreclosure happen, because after you lose the home, you will still need to find a new place to live. All too often, the price paid in rent will be almost as high if not higher than the current mortgage payment. Remember: The owner of the property needs to make his mortgage payment, too, so he's going to charge a rental payment that's higher than his mortgage costs.
Deficiency judgment. It's not uncommon that the sale of the home is insufficient to cover the remainder of the mortgage. When the property has been damaged, or market values have dropped, you may end up with a bill in the tens of thousands for the difference.
Despite what many people think, most lending institutions are not anxious to foreclose. It's a last-ditch effort to recover their money and minimize their losses, and it's an incredible hassle. Most lenders would rather avoid it, if possible. There are multiple sources for help that you should be aware of, and most lenders will be happy to hear that you are going to try to keep the home rather than just await a foreclosure.
Housing Counseling Agency. The US Department of Housing and Urban Development maintains a list of HUD-approved counseling agencies. Call (800) 569-4287 to find the agency nearest them.
FHA-Insurance fund. FHA borrowers may qualify to have HUD make a one-time payment to bring the mortgage current. See www.hud.gov/foreclosure for more information on the requirements to qualify.
Different mortgage program. Talk to a loan officer about the possibility of refinancing the mortgage to a more affordable program.
Special Forbearance. Many borrowers can qualify for a new payment structure if you've had an increase in the cost-of-living, such as unexpected medical expenses, or a decrease in wages. This payment structure will allow you to repay the lender in a given time frame.
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Compliments of the Business Booster Collection and
Wendy Taylor, Financial Stragegies, Capitola
Finding a new home. Don't believe that it will be better to let the foreclosure happen, because after you lose the home, you will still need to find a new place to live. All too often, the price paid in rent will be almost as high if not higher than the current mortgage payment. Remember: The owner of the property needs to make his mortgage payment, too, so he's going to charge a rental payment that's higher than his mortgage costs.
Deficiency judgment. It's not uncommon that the sale of the home is insufficient to cover the remainder of the mortgage. When the property has been damaged, or market values have dropped, you may end up with a bill in the tens of thousands for the difference.
Despite what many people think, most lending institutions are not anxious to foreclose. It's a last-ditch effort to recover their money and minimize their losses, and it's an incredible hassle. Most lenders would rather avoid it, if possible. There are multiple sources for help that you should be aware of, and most lenders will be happy to hear that you are going to try to keep the home rather than just await a foreclosure.
Housing Counseling Agency. The US Department of Housing and Urban Development maintains a list of HUD-approved counseling agencies. Call (800) 569-4287 to find the agency nearest them.
FHA-Insurance fund. FHA borrowers may qualify to have HUD make a one-time payment to bring the mortgage current. See www.hud.gov/foreclosure for more information on the requirements to qualify.
Different mortgage program. Talk to a loan officer about the possibility of refinancing the mortgage to a more affordable program.
Special Forbearance. Many borrowers can qualify for a new payment structure if you've had an increase in the cost-of-living, such as unexpected medical expenses, or a decrease in wages. This payment structure will allow you to repay the lender in a given time frame.
-----------------
Compliments of the Business Booster Collection and
Wendy Taylor, Financial Stragegies, Capitola
Sunday, September 2, 2007
Don't put all the blame on mortgage brokers
There has been a lot of finger pointing at the mortgage broker community during the past few months. Everyone from borrowers to members of Congress seem to be trying to pin the blame for the nation's current mortgage mess on mortgage brokers.
The boom years of 2001-2005 saw unprecedented growth in mortgage volume. This growth created a huge demand for employment in the mortgage industry and this environment allowed and even encouraged widespread unprofessional behavior by some in the mortgage industry.
Some of this behavior was the result of neophytes flooding into the industry, but I believe that most of it was due to greed, which resulted in fraudulent transactions. There are numerous examples that have come to my attention where borrowers paid tens of thousands of dollars in unwarranted closing costs to mortgage originators, who took outrageous advantage of unsuspecting consumers just to fatten their own wallets.
Sure, one can shake fingers at those mortgage originators but most of us cannot and should not be grouped into that category. We have all heard stories about unscrupulous attorneys, accountants and doctors, too. There are bad apples in every batch. Given the fact that the majority of loans are originated by mortgage companies makes mortgage brokers an easy target for finger pointers.
When a borrower goes to a bank to inquire about financing, he only will have access to that bank's loan programs at that bank's rates. For a borrower to satisfy himself that he is getting the best loan for his needs, he will have to go from bank to bank and compare all of the options. It may be that the bank's loan officer can function as a broker also but he sure is not going to be able to refer the borrower to a loan program that is available at another bank.
Mortgage brokers have access to hundreds of loan programs through their relationships with dozens of banks and mortgage companies. As a result, a professional and ethical mortgage broker should be able to arrange a mortgage for his client that is right for his needs and one that is competitively priced. With that in mind, it is no surprise that mortgage companies are doing the bulk of the business.
On a more global scale, as I wrote in this column at the beginning of the summer, it is not fair to single out the mortgage industry as the fall guy in trying to explain the subprime crises and the fall in home prices across the nation [although Santa Cruz has escaped most of this]. As I mentioned in that column, the consumer has to accept some of the blame for not being responsible about spending and saving money and reading the loan disclosures and documents.
Peter Boutell is a mortgage consultant with Santa Cruz Home Finance, 1535 Seabright Ave., Santa Cruz, CA 95062. Archived columns are available at www.peterboutell.com.
The boom years of 2001-2005 saw unprecedented growth in mortgage volume. This growth created a huge demand for employment in the mortgage industry and this environment allowed and even encouraged widespread unprofessional behavior by some in the mortgage industry.
Some of this behavior was the result of neophytes flooding into the industry, but I believe that most of it was due to greed, which resulted in fraudulent transactions. There are numerous examples that have come to my attention where borrowers paid tens of thousands of dollars in unwarranted closing costs to mortgage originators, who took outrageous advantage of unsuspecting consumers just to fatten their own wallets.
Sure, one can shake fingers at those mortgage originators but most of us cannot and should not be grouped into that category. We have all heard stories about unscrupulous attorneys, accountants and doctors, too. There are bad apples in every batch. Given the fact that the majority of loans are originated by mortgage companies makes mortgage brokers an easy target for finger pointers.
When a borrower goes to a bank to inquire about financing, he only will have access to that bank's loan programs at that bank's rates. For a borrower to satisfy himself that he is getting the best loan for his needs, he will have to go from bank to bank and compare all of the options. It may be that the bank's loan officer can function as a broker also but he sure is not going to be able to refer the borrower to a loan program that is available at another bank.
Mortgage brokers have access to hundreds of loan programs through their relationships with dozens of banks and mortgage companies. As a result, a professional and ethical mortgage broker should be able to arrange a mortgage for his client that is right for his needs and one that is competitively priced. With that in mind, it is no surprise that mortgage companies are doing the bulk of the business.
On a more global scale, as I wrote in this column at the beginning of the summer, it is not fair to single out the mortgage industry as the fall guy in trying to explain the subprime crises and the fall in home prices across the nation [although Santa Cruz has escaped most of this]. As I mentioned in that column, the consumer has to accept some of the blame for not being responsible about spending and saving money and reading the loan disclosures and documents.
Peter Boutell is a mortgage consultant with Santa Cruz Home Finance, 1535 Seabright Ave., Santa Cruz, CA 95062. Archived columns are available at www.peterboutell.com.
Saturday, September 1, 2007
FED to weigh markets turmoil
The Federal Reserve won't bail investors out of their bad decisions but will act if recent market turmoil threatens economic growth, Chairman Ben Bernanke said Friday.
Mr. Bernanke's much-anticipated speech solidified investor expectations the Fed will cut its target for the federal-funds rate -- charged on overnight loans between banks -- from 5.25% when policy makers meet Sept. 18. Markets see some probability the rate will drop to 4.75% but several economists said a drop to 5% is more likely, accompanied by a statement suggesting more cuts could come. Those expectations helped boost stocks. Read the full speech at this link
Excerpted from Greg at IP
Mr. Bernanke's much-anticipated speech solidified investor expectations the Fed will cut its target for the federal-funds rate -- charged on overnight loans between banks -- from 5.25% when policy makers meet Sept. 18. Markets see some probability the rate will drop to 4.75% but several economists said a drop to 5% is more likely, accompanied by a statement suggesting more cuts could come. Those expectations helped boost stocks. Read the full speech at this link
Excerpted from Greg at IP
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