Archive for the ‘housing bubble’ Category

WASHINGTON – After a slow start, the Obama administration’s mortgage relief program has reached one in five eligible homeowners, a government report says. As of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, have signed up for trials lasting up to five months, the Treasury Department said Tuesday. The modifications reduce monthly payments to more affordable levels. Launched with great fanfare in March, the plan got off to a weak start, but now nearly 920,000 loan modification offers have been sent to more than 3.2 million eligible homeowners. That works out to 29 percent, up from 15 percent at the end of July. Read more

WASHINGTON – Thousands of borrowers on the verge of foreclosure will soon have the option of renting their homes from Fannie Mae, under a policy announced Thursday. The government-controlled company, through its new “Deed for Lease” program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that. Read more

A deal has been reached by the Senate that would extend the 8k tax credit and then some.  Income limits would be extended to 225k for couples and there would be a $6500 credit for people who are repeat buyers. >>> More details on Marketwatch.com

If you owe more than your house is worth and it gets foreclosed, a bank can come after you personally for a deficiency.  Except, however, in states like CA which prohibit a deficiency on a personal residence (except if you refied your loan or it’s a VA loan).  In states that have anti-deficiency statutes, homeowners are more likely to walk away because there’s nothing to lose – except your credit. Read more

By RANDALL W. FORSYTH

Barrons, October 21, 2009

THE FEDS SEEM INTENT UPON REFLATING the housing bubble. Not the Federal Reserve, as you may have read elsewhere, but the federal government. Following the cash-for-clunkers idiocy, the federal government may extend its subsidy for homebuyers. As an inefficient use of taxpayer money, clunker cash pales besides the homebuyer handout. With housing affordability currently the best it’s been in most of our lifetimes, with marked-down home prices and mortgage money in the 5% range, you wouldn’t think homebuyers would need a subsidy. But there it is, and it’s a lot more expensive than you think. How’s that possible? Gayer figures that of the 1.9 million homebuyers that will get the $8,000 tax credit, 85% would have bought a house anyway. The price tag of $15 billion — about twice what Congress had intended — he reckons will result in approximately 350,000 additional home sales, at a price tag of $43,000 for each additional sale. The National Association of Home Builders, not exactly a disinterested bunch, figures the subsidy would boost house sales considerably more, by 700,000 homes. That implies each of those additional sales would cost American taxpayers only $133,000 — still “a very expensive and poorly targeted subsidy,” writes Gayer. Unbelievable, you say. But remember, everybody gets the subsidy, both the vast majority who would have bought any way and yet are getting a windfall, plus those who were lured into the market by the largesse. It’s like buying free drinks for a crowd that’s bellied up to the bar with their wallets open already. In actuality, that cost does not come in the form of checks being mailed out to homebuyers. They get an $8,000 credit to their 2009 taxes when they file their return next April 15 — a “tax expenditure” in the jargon of Washington. Either way, there’s less money in the Treasury after it racked up a $1.4 trillion deficit in the fiscal year just ended — equal to 10% of gross domestic product, a percentage not seen since the nation was paying to fight World War II. “There are two larger points we should not lose sight of,” Gayer writes. “First, tax expenditures are not a free lunch. The billions of dollars spent on the tax credit will ultimately have to be paid back through higher, economically distorting taxes. And while a tax credit is unlikely to be the straw that breaks the camel’s back, our growing debt burden is something to fear. “Second, government policies to promote homeownership (or, more accurately, home-borrowership) were partial contributors to our housing and credit market problems,” he continues. “Ultimately, we need to decrease the government’s housing incentives, including the mortgage-finance subsidies, the mortgage-interest deduction, and the favorable capital gains treatment for housing. A good place to start this weaning would be by not extending or expanding the home-buyer tax credit.”

AP – Tens of thousands of people may have taken advantage of the first-time home buyer tax credit to defraud the government, an IRS watchdog office said Thursday, in testimony that could jeopardize efforts to extend the popular program. More info

Finally, after a debilitating plunge the housing market is showing signs of a recovery. Statistics show that home sale prices have steadily rose for the last few months but that rosy picture is still tainted from the on-going foreclosures and layoffs. Homebuyers have mega incentives at their disposal to purchase new and resale homes and many have taken the opportunity to breathe life into the housing market but we are not out of the woods just yet. According to the Case-Shiller Price Index, compiled by Standard & Poor, July had an outstanding increase of 7.2 percent in home sales which accounted for the largest jump in the last ten years. It makes you want to breathe a sigh of relief and the increased numbers show improvement but let’s really take a closer look at this recovery before bringing out the balloons and party favors. A third of the recent increase in home sales is first-time home buyers taking advantage of the federal tax incentives and these first time homebuyer tax incentives end in November. Another third are on account of foreclosures that unfortunately will not end anytime soon. While the country is becoming excited about the recent influx of home sales the Case-Shiller national housing report explains this surge of home sales; Looks like the lower the price tag the higher the sales and homes selling for over $250,000 are still down. Prospects for a full recovery look good but slow coming; more foreclosures are on the horizon. Sub-prime creative loans were all the rage in the mid-2000’s and the focus was on interest-only payments but the time is quickly coming for those payments towards the principal with ballooned interest rates. Are homeowners ready for this? Not all of them. Could this mean a new wave of foreclosures? Yes! Interest-only creative sub-prime loans were a resourceful way of buying more than you needed and more than you could afford. Homebuyers could purchase a home and pay the interest while delaying any payments towards the principal for several years. However; not only are those principal payments coming due but now the payments will increase double and triple the amount. While homeowners were certain their salaries would have increased and career goals had been met, during this downturn in our economy most have been sadly disappointed. So we’re looking at this surge of home sales as the beginning of a recovery but the tax credit will be eliminated in the next two months and we’re still facing layoffs and foreclosures…it’s too soon to call it but for homeowners looking to buy, it’s still advantageous to get a new home now.

Top 5 Cities Where Home Prices are Hitting Bottom 1. Las Vegas, Nev. Las Vegas-Paradise-Pahrump, Nev., Combined Statistical Area Change: 24 percentage points Homes with Price Reductions, 1/1/2009: 54% Homes with Price Reductions, 9/11/2009: 30% Moody’s Economy.com forecasts that five years from now, home prices in Las Vegas will have risen by 3.53% 2. Phoenix, Ariz. Phoenix Lake-Cedar Ridge, CA Metropolitan Statistical Area Change: 18 percentage points Homes with Price Reductions, 1/1/2009: 58% Homes with Price Reductions, 9/11/2009: 40% Moody’s Economy.com forecasts that five years from now, home prices in Phoenix will have risen by 7.44% 3. San Diego, Calif. San Diego-Carlsbad-San Marcos, Calif., Metropolitan Statistical Area Change: 15 percentage points Homes with Price Reductions, 1/1/2009: 45% Homes with Price Reductions, 9/11/2009: 30% Moody’s Economy.com forecasts that five years from now, home prices in San Diego will have risen by 25.41% 4. Miami, Fla. Miami-Fort Lauderdale-Miami Beach, Fla. Metropolitan Statistical Area Change : 12 percentage points Homes with Price Reductions, 1/1/2009: 43% Homes with Price Reductions, 9/11/2009: 31% Moody’s Economy.com forecasts that five years from now, home prices in Miami will have dropped by -2.93% 5. Los Angeles, Calif. Los Angeles-Long Beach-Riverside, Calif., Combined Statistical Area Change: 10 percentage points Homes with Price Reductions, 1/1/2009: 45% Homes with Price Reductions, 9/11/2009: 35% Moody’s Economy.com forecasts that five years from now, home prices in Los Angeles will have risen by 12.36%

Have you thought about moving up to that dream home lately? With our sour real estate market still reeling from shock, homebuyers are still in the market to move-up to a bigger home at an affordable price. No, the housing markets are not looking that great and that means the perfect opportunity for you to move-up to that home you’ve always wanted. Just two years ago prices were obnoxiously high but now…Buy, Buy, Buy is the only motto you should know. Interest rates are still at a low and it’s a buyers market. You won’t see home prices and interest rates as low as this for years to come. When we do come out of this financial spiral and level off, the housing market is going to once again thrive and you’ll be left with higher priced homes, high interest rates and overbearing marketing tactics. What makes this the Perfect Opportunity to move-up to a bigger home? I know you’ve noticed these prices lately. Remember what those same prices used to be just two years ago? $400,000 and $500,000 and $900,000 for the home you always dreamed of.  Now, you can move-up to a bigger home that’s lower than its original valued price and it’s move-in ready. These homes were already overpriced and now owners must sell them at the current market value.  Sure, they will take a big loss, but it’s either sell or continue to make the loan payments themselves. Not only will you get a bargain on the price of your dream home but the interest rates are unbelievably low which makes your mortgage payment affordable.  Even your down payment on a bigger home will be less simply because the price has been reduced. Everything about this real estate market is a win-win no-brainer.  Just think that same home you only dreamt about owning used to cost $500,000 and now you can steal it away for $350,000. Furthermore, this bargain of a home will only increase its value back up to what it was originally worth.  You buy a bigger home and give the market time to recover and within the next few years you’ll instantly increase your new home’s value by thousands of dollars. The market will recover and housing will boom again and although that sounds optimistic it won’t be great for those that waited to move into a bigger home. Higher interest rates, more profitable bank fees for lenders – and you can count on that when we do recover – and  inflated home prices will follow. And everyone is in the market to buy. Even the government backed loans accept blemished credit so what excuse do you really have to hold back and not move up to a bigger home? Everyday interest rates fluctuate and you’ll want the lowest most affordable rate to buy the most house that will benefit you and your family. Get it now before it slips through your fingers.