$65,000 Soft Second Mortgages through FANO have been reissued!
Blogging From The Desk of Alicia Lagarde-Craig
The First Time Homebuyer Fund offers soft-second mortgage loans at zero (0%) per cent interest up to $65,000 and a closing cost assistance grant up to $10,000 for a homebuyer who has not owned a principal residence within the last three (3) years or is a single parent who no longer owns a home because of a divorce. This fund serves first-time homebuyers with household incomes of 120% or less of the metropolitan area median income (AMI) and who are purchasing homes primarily in the Housing Opportunity Zones. Gross household incomes of qualifying borrowers for this fund cannot exceed the following:
"New higher income limits approved!"
1 person -- $50,280
2 persons - $57,360
3 persons - $64,560
4 persons - $71,760
5 persons - $77,520
6 persons - $83,280
7 persons - $89,040
8 persons - $94,680
The borrower must also invest at least 1% of the purchase price or $1,500 from personal funds, which ever is greater.
Homebuyers who have already received payments from the State under the “sell” or “relocate” option under the Road Home Homeownership Program are not eligible to receive additional financial assistance from this program.
To learn more about the Pathway to Homeownership Soft-Second Mortgage Loan Program
call Alicia Lagarde-Craig at 504.382.3724 or Jeff Craig at 504.352.6190.
This Finance Authority will be processing an additional 164 Loans on a First Come First Served Basis, so if you are a serious buyer and would like more information regarding this program, please call Alicia or Jeff to get the process started.
Friday, May 21, 2010
Monday, May 10, 2010
Friday, April 30, 2010
First Time Homebuyer Fund through FANO is back up and running!
Blogging From The Desk of Alicia Lagarde-Craig
First-Time Homebuyer Fund
The First Time Homebuyer Fund offers soft-second mortgage loans at zero (0%) per cent interest up to $65,000 and a closing cost assistance grant up to $10,000 for a homebuyer who has not owned a principal residence within the last three (3) years or is a single parent who no longer owns a home because of a divorce. This fund serves first-time homebuyers with household incomes of 120% or less of the metropolitan area median income (AMI) and who are purchasing homes primarily in the Housing Opportunity Zones. Gross household incomes of qualifying borrowers for this fund cannot exceed the following:
"New higher income limits approved!"
1 person -- $50,280
2 persons - $57,360
3 persons - $64,560
4 persons - $71,760
5 persons - $77,520
6 persons - $83,280
7 persons - $89,040
8 persons - $94,680
The borrower must also invest at least 1% of the purchase price or $1,500 from personal funds, which ever is greater.
Homebuyers who have already received payments from the State under the “sell” or “relocate” option under the Road Home Homeownership Program are not eligible to receive additional financial assistance from this program.
To learn more about the Pathway to Homeownership Soft-Second Mortgage Loan Program
call Alicia Lagarde-Craig at 504.382.3724 or Jeff Craig at 504.352.6190.
This Finance Authority will be processing an additional 164 Loans on a First Come First Served Basis, so if you are a serious buyer and would like more information regarding this program, please call Alicia or Jeff to get the process started.
First-Time Homebuyer Fund
The First Time Homebuyer Fund offers soft-second mortgage loans at zero (0%) per cent interest up to $65,000 and a closing cost assistance grant up to $10,000 for a homebuyer who has not owned a principal residence within the last three (3) years or is a single parent who no longer owns a home because of a divorce. This fund serves first-time homebuyers with household incomes of 120% or less of the metropolitan area median income (AMI) and who are purchasing homes primarily in the Housing Opportunity Zones. Gross household incomes of qualifying borrowers for this fund cannot exceed the following:
"New higher income limits approved!"
1 person -- $50,280
2 persons - $57,360
3 persons - $64,560
4 persons - $71,760
5 persons - $77,520
6 persons - $83,280
7 persons - $89,040
8 persons - $94,680
The borrower must also invest at least 1% of the purchase price or $1,500 from personal funds, which ever is greater.
Homebuyers who have already received payments from the State under the “sell” or “relocate” option under the Road Home Homeownership Program are not eligible to receive additional financial assistance from this program.
To learn more about the Pathway to Homeownership Soft-Second Mortgage Loan Program
call Alicia Lagarde-Craig at 504.382.3724 or Jeff Craig at 504.352.6190.
This Finance Authority will be processing an additional 164 Loans on a First Come First Served Basis, so if you are a serious buyer and would like more information regarding this program, please call Alicia or Jeff to get the process started.
Wednesday, February 10, 2010
Blogging From The Desk of Alicia Lagarde-Craig
This Month in Real Estate
February 2010
...............................................................................................................................................
Commentary
January began the new decade with indications that the economy is beginning to gain traction. Real GDP grew by 2.2 percent in the third quarter of 2009 and preliminary signals point to a continued positive trend for the following quarter. GDP is a measure of total products and services produced by a country and indicates the health of the country's economy.
A dip in home sales in December was due in large part to timing. First time buyers that would have liked to close in December but qualified for the tax credit bumped their timeline up in order to cash in. News of the credit’s extension reached many of them after their plans to close in December were set.
Interest rates are back below 5% and home prices are up compared to last year. The government continues to attempt to minimize the impact of troubled homeowners by continuing to improve its foreclosure prevention program and has also taken steps to help foreclosures buyers purchase faster.
Although the unemployment rate is expected to stay high as jobs increase modestly, experts expect the economy to continue to grow in 2010.
The Housing Market
Existing Home Sales
After a rising surge for three straight months, existing home sales slowed in December after first-time buyers rushed to meet the original November tax credit deadline and evidenced by first timers accounting for 51% of sales in November compared to 43% in December. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. December sales of 5.45 million remain 15 percent above the 4.74 million-unit level last year.
Median Home Price
Existing-home price was $178,300 in December, 1.5 percent higher than December 2008 and 8.2 percent above its low in January 2009. It was the first year-over-year gain in median price since August 2007, attributable to an increase in the number of mid- to upper-priced homes in the sales.
Inventory
The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.
Mortgage Rates
Mortgage rates have moved back to less than 5 percent, which have been categorized by industry experts like Freddie Mac chief economist Frank Nothaft as “near a record low.” This move that may help boost home loan demand and lend support to the housing market recovery. On January 28, the average 30-year fixed-rate mortgage was 4.98 percent.
Affordability
Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.
Sources: National Association of Realtors, Freddie Mac
Government Action
FHA Tightens Lending Requirements
The Federal Housing Administration (FHA) insured almost 30 percent of all purchase loans and 20 percent of refinances from September 2008 to September 2009, up from about only 2 percent of all loans three years earlier. The influx of loans combined with falling capital reserves, which cushion against rising defaults, has led the FHA to announce several measures to strengthen its economic vitality.
On January 20, the FHA announced it will do the following:
1. Raise Insurance Fees - In exchange for FHA backing, borrowers pay an up-front premium. Previously it was 1.75% of their loan. It’s now risen to 2.25%.
2. Cap Seller Contribution to Buyer’s Closing Costs - Sellers can contribute a maximum of 3%, down from 6%, of the sales price to the buyer’s closing costs. The higher cap created risk by incentivizing homes to sell at a substantially marked-up price to compensate for contribution. 3% is still a significant proportion to closing costs.
3. Require Higher Down Payments for Poor Credit - Beginning this summer, borrowers with a credit score below 580 will need to make a down payment of at least 10%. The FHA will still provide a viable alternative to the 1% of FHA borrowers who fall in this category, whereas most lenders’ credit score cutoff is 620.
The good news is the FHA, an integral player in the market, has stepped up to protect itself so it can continue helping first-time buyers, those with less cash for a down payment, and those with less-than-perfect credit obtain home loans. Additionally, these proactive measures aim to protect the agency from needing taxpayer funds from the government.
Source: The Wall Street Journal
FHA to Help New Foreclosures Sell Fast
FHA has announced it will lift the 90-day seasoning requirement for one year. The FHA ‘s 90-day “seasoning” provision requires that a home sold to an FHA buyer must be owned for at least 90 days by the seller before closing. This is intended to prevent buyers from purchasing property from “flippers” at an overly inflated value.
In the current climate, quickly selling foreclosures has risen in importance while the prominence of “flippers” has dramatically decreased. Acquiring, rehabbing, and reselling a foreclosure often takes fewer than 90 days. Banks have been reluctant to sell foreclosures to FHA buyers if they would need to push closing back to meet the FHA requirement.
There are additional stipulations; for more, please visit the press release.
Quickly moving foreclosures out of the bank’s hands and into those of home buyers is an important step in stabilizing home prices, neighborhoods, and communities leading toward a healthy housing market.
Source: U.S. Department of Housing and Urban Development
Topics For Buyers & Sellers
Price it Right
Sellers who listed their home at the price originally recommended by their agent sold it:
38 days faster
For 2.25% higher
With 1 less price reduction
Compared to sellers who did not take their agent's recommendation.
Staging Stats
Compared to homes that were not staged, staged homes had:
more showings
a higher list-to-sell percentage
Other notable stats found include:
Only 1 in 3 sellers staged their home, even with all the commonly accepted advantages of staging.
Staging typically took between 2 - 6 hours to complete.
Including the cost of a staging professional and items purchased or rented, staging cost an average of $523.
Although it has advantages at all price points, staging was also found to be particularly important for homes priced over $600,000.
Source: Keller Williams Research
This Month in Real Estate
February 2010
...............................................................................................................................................
Commentary
January began the new decade with indications that the economy is beginning to gain traction. Real GDP grew by 2.2 percent in the third quarter of 2009 and preliminary signals point to a continued positive trend for the following quarter. GDP is a measure of total products and services produced by a country and indicates the health of the country's economy.
A dip in home sales in December was due in large part to timing. First time buyers that would have liked to close in December but qualified for the tax credit bumped their timeline up in order to cash in. News of the credit’s extension reached many of them after their plans to close in December were set.
Interest rates are back below 5% and home prices are up compared to last year. The government continues to attempt to minimize the impact of troubled homeowners by continuing to improve its foreclosure prevention program and has also taken steps to help foreclosures buyers purchase faster.
Although the unemployment rate is expected to stay high as jobs increase modestly, experts expect the economy to continue to grow in 2010.
The Housing Market
Existing Home Sales
After a rising surge for three straight months, existing home sales slowed in December after first-time buyers rushed to meet the original November tax credit deadline and evidenced by first timers accounting for 51% of sales in November compared to 43% in December. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. December sales of 5.45 million remain 15 percent above the 4.74 million-unit level last year.
Median Home Price
Existing-home price was $178,300 in December, 1.5 percent higher than December 2008 and 8.2 percent above its low in January 2009. It was the first year-over-year gain in median price since August 2007, attributable to an increase in the number of mid- to upper-priced homes in the sales.
Inventory
The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.
Mortgage Rates
Mortgage rates have moved back to less than 5 percent, which have been categorized by industry experts like Freddie Mac chief economist Frank Nothaft as “near a record low.” This move that may help boost home loan demand and lend support to the housing market recovery. On January 28, the average 30-year fixed-rate mortgage was 4.98 percent.
Affordability
Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.
Sources: National Association of Realtors, Freddie Mac
Government Action
FHA Tightens Lending Requirements
The Federal Housing Administration (FHA) insured almost 30 percent of all purchase loans and 20 percent of refinances from September 2008 to September 2009, up from about only 2 percent of all loans three years earlier. The influx of loans combined with falling capital reserves, which cushion against rising defaults, has led the FHA to announce several measures to strengthen its economic vitality.
On January 20, the FHA announced it will do the following:
1. Raise Insurance Fees - In exchange for FHA backing, borrowers pay an up-front premium. Previously it was 1.75% of their loan. It’s now risen to 2.25%.
2. Cap Seller Contribution to Buyer’s Closing Costs - Sellers can contribute a maximum of 3%, down from 6%, of the sales price to the buyer’s closing costs. The higher cap created risk by incentivizing homes to sell at a substantially marked-up price to compensate for contribution. 3% is still a significant proportion to closing costs.
3. Require Higher Down Payments for Poor Credit - Beginning this summer, borrowers with a credit score below 580 will need to make a down payment of at least 10%. The FHA will still provide a viable alternative to the 1% of FHA borrowers who fall in this category, whereas most lenders’ credit score cutoff is 620.
The good news is the FHA, an integral player in the market, has stepped up to protect itself so it can continue helping first-time buyers, those with less cash for a down payment, and those with less-than-perfect credit obtain home loans. Additionally, these proactive measures aim to protect the agency from needing taxpayer funds from the government.
Source: The Wall Street Journal
FHA to Help New Foreclosures Sell Fast
FHA has announced it will lift the 90-day seasoning requirement for one year. The FHA ‘s 90-day “seasoning” provision requires that a home sold to an FHA buyer must be owned for at least 90 days by the seller before closing. This is intended to prevent buyers from purchasing property from “flippers” at an overly inflated value.
In the current climate, quickly selling foreclosures has risen in importance while the prominence of “flippers” has dramatically decreased. Acquiring, rehabbing, and reselling a foreclosure often takes fewer than 90 days. Banks have been reluctant to sell foreclosures to FHA buyers if they would need to push closing back to meet the FHA requirement.
There are additional stipulations; for more, please visit the press release.
Quickly moving foreclosures out of the bank’s hands and into those of home buyers is an important step in stabilizing home prices, neighborhoods, and communities leading toward a healthy housing market.
Source: U.S. Department of Housing and Urban Development
Topics For Buyers & Sellers
Price it Right
Sellers who listed their home at the price originally recommended by their agent sold it:
38 days faster
For 2.25% higher
With 1 less price reduction
Compared to sellers who did not take their agent's recommendation.
Staging Stats
Compared to homes that were not staged, staged homes had:
more showings
a higher list-to-sell percentage
Other notable stats found include:
Only 1 in 3 sellers staged their home, even with all the commonly accepted advantages of staging.
Staging typically took between 2 - 6 hours to complete.
Including the cost of a staging professional and items purchased or rented, staging cost an average of $523.
Although it has advantages at all price points, staging was also found to be particularly important for homes priced over $600,000.
Source: Keller Williams Research
Monday, February 1, 2010
10 Home Features Buyers Want
Blogging From The Desk of Alicia Lagarde-Craig
10 Home Features Buyers Want
Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio.
Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1. Large kitchens with islands
2. Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows.
3. Home offices
4. Main-floor master suite
5. Outdoor living space
6. Ceiling fans
7. Soaking tub in the master suite and/or an oversize shower with a seating area
8. Stone and brick exteriors rather than stucco or vinyl
9. Community walking paths and playgrounds
10. Two-car garages, but three-car garages are even more desirable
10 Home Features Buyers Want
Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.
“It's all about family togetherness – casual living, entertaining and flexible spaces," says Carol Lavender, president of the Lavender Design Group in San Antonio.
Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1. Large kitchens with islands
2. Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows.
3. Home offices
4. Main-floor master suite
5. Outdoor living space
6. Ceiling fans
7. Soaking tub in the master suite and/or an oversize shower with a seating area
8. Stone and brick exteriors rather than stucco or vinyl
9. Community walking paths and playgrounds
10. Two-car garages, but three-car garages are even more desirable
Monday, December 14, 2009
This Month in Real Estate December 2009
Blogging From The Desk of Alicia Lagarde-Craig
This Month in Real Estate
December 2009
Commentary
Small steps to economic recovery continued last month. Among the positive readings was the report of a third quarter GDP growth rate of 2.8 percent, which followed four consecutive quarterly declines. This advance comes in well ahead of that of our Canadian neighbors, whose economy was once anticipated to be the first country out of recession, and by significant margin. Canada posted marginal 0.4 percent growth. Unemployment fell in November for the first time since April 2008. A strong rebound in home sales activity from year ago levels also points to a firmer stabilization.
With the extension of the $8,000 federal housing tax credit into spring 2010, first-time buyers will now have an additional few months to purchase their dream homes. Expansion of the income restrictions now gives possibilities for higher earners to participate too. And the $6,500 tax credit now available to established homeowners with five consecutive years or more in their homes broadens the opportunity landscape. This in turn will allow the housing market more time to find a more solid footing on a sustainable recovery.
Although economists continue to debate the overall shape of the recovery, it is widely agreed that the U.S. economy will take a long time to rebound. Unemployment is expected to remain high for several quarters and the number of underemployed is expected by some economists to remain a drag on growth prospects. On the brighter side, according to some economists, a slow and steady growth will likely fair better for the long-term well-being of the economy. Slower, sustained growth can help prevent dangerous asset bubbles, like the recent housing and technology bubbles, from growing and bursting.
The Housing Market
Existing Home Sales - Up 24% from last year
Existing home sales recorded another strong gain in October with many buyers rushing to beat the deadline for the first-time buyer tax credit scheduled to expire at the end of November. Sales surged 10.1 percent to 6.1 million units over September sales of 5.54 million and are 23.5 percent above the 4.94 million-unit level seen last year. Sales activity is at the highest level since February 2007 when it reached 6.55 million.
Median Home Price - Very favorable
Low home prices are contributing to extremely favorable affordability conditions. Existing-home price was $173,100 in October, 5 percent higher from its low in January but still 7.1 percent below October 2008. Distressed properties, which accounted for 30 percent of all transactions in October, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes.
Inventory - Lowest level in more than 2.5 years
"We are getting closer to a general balance between buyers and sellers,” according to Lawrence Yun, NAR chief economist. The supply of homes is now at the lowest level in more than two and a half years. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, representing a seven-month supply at the current sales pace, down from September’s eight-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market.
Mortgage Rates – Back at 4.78%
Remaining at attractive levels for people looking to buy a home or refinance, historically low interest rates are boosting the market. Rates for 30-year fixed loans fell to 4.95 percent in October from 5.06 percent the month before. During the week ended November 25, rates again dropped to the low 4.78 percent reached in the spring. As the economy enters its recovery phase and concerns over inflation come back, mortgage rates are expected to go up.
Affordability – Best since 1970s
Unprecedented interest rates, low home prices, as well as the first-time buyer tax credit are lifting the housing market. All these factors combined are “adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970,” according to Lawrence Yun, NAR chief economist. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.
Sources: National Association of Realtors, Freddie Mac
Government Action
New Fannie Mae Policies
"First Look"
In many markets dominated by distressed properties, buyers jumped off the fence in droves and as a result the number of homes for sale in the first tier of the market decreased significantly. When a new foreclosure becomes available for sale, it often is snapped up by investors with cash on hand, leaving the average home buyer looking for a place to live out of luck.
Fannie Mae introduced a new “First Look” initiative to address this and aid in the stabilization of neighborhoods.
During the first 15 days a Fannie Mae REO is on the market, only buyers who will live in the home and public entities committed to the best interests of the community may purchase it.
Buyers will have 45 days to close, up from 30 days.
Earnest money requirement may be reduced.
This will hopefully give the average home buyer a greater chance of purchasing foreclosures and provide support to hard-hit neighborhoods, because owner-occupants are more invested in the long-term vitality of a community whereas investors typically are more invested in their monetary return from the property.
Increased Credit Scores
Fannie Mae is raising its minimum credit score from 580 to 620. This risk management measure will help protect Fannie Mae from future defaults and foreclosure by raising their standard and accepting less risky loans.
While risk management is a sound and healthy approach for an entity that the economy depends on, this underscores the importance that potential home buyers check their credit report early in the process, allowing more time to clear up any errors.
Earlier this year, Experian, one of three major credit-reporting bureaus, began exclusively providing complete credit report information when purchased directly from Experian or obtained from the government annual credit report.
Source: National Association of Realtors
FHA Signals Efforts to Manage Risk
In an effort to secure its financial health, the Federal Housing Administration plans to require borrowers to have more “skin in the game” soon. Over the past three years, FHA’s market share has boomed from about 2 percent of all new loans to about 30 percent of all new loans this year and 20 percent of refinances. The escalading volume that the administration is currently handling calls for stricter requirements as evidenced by FHA’s capital ratios falling to nearly 0.5 percent well below the minimum of 2 percent.
The agency is still analyzing the levels and time frames it wishes to tighten its standards but they expect to:
Increase minimum down payments
Increase minimum credit scores
Increase insurance premiums
Lower the amount of seller concessions
As one of the major players in the mortgage market, the health of FHA is imperative to the housing market and flow of credit to home buyers, as well as to the health of the overall economy. Taking measures to safeguard the agency from needing a government tax payer-funded bailout is a notable risk management measure.
According to a Keller Williams research study, the typical first-time buyer put down 3.5 percent this year. Those who want to take advantage of the tax credit before the April 30 contract, June 30 closing deadline may want to beef up their savings and check their credit report now in anticipation of any changes.
Sources: National Association of Realtors, KW Research First Time Home Buyer Survey
Topics For Buyers & Sellers
First Time & Distressed Property Home Buyers
What are other first time buyers doing?
The tax credit extension and expansion in November has fueled new discussion about home buyers and the housing market in 2010. Here’s a look at first-time buyers in 2009.
The median age is 28, significantly down from where it was in 2005 at 32.
Location or Neighborhood was the No. 1 “must-have” for 36% of buyers.
2 out of 3 sellers paid at least part of the buyer’s closing costs.
76% used their own savings for the down payment.
1 in 4 had help from their family for the down payment.
As elevated levels of distressed properties are expected to continue for the next few years, here is a glimpse of buying a distressed property:
27% of foreclosures* were purchased by investors.
47% of distressed* properties were purchased by first-time buyers.
89% of those first time buyers that purchased a distressed property were motivated by the $8,000 tax credit.
7 in 10 agents have seen an increase in multiple offers.
Approximately 3 out of 5 agents discuss the differences between buying distressed and traditional properties at the buyer consultation.
* Distressed – Short Sale and REO, Foreclosure – REO Only
Contact Alicia & Jeff,
your local real estate experts,
for information about what's going on in our area.
Newsletter Contents
1. Commentary
2. The Housing Market
3. Government Action
4. Topics for Buyers
and Sellers
This Month in Real Estate
December 2009
Commentary
Small steps to economic recovery continued last month. Among the positive readings was the report of a third quarter GDP growth rate of 2.8 percent, which followed four consecutive quarterly declines. This advance comes in well ahead of that of our Canadian neighbors, whose economy was once anticipated to be the first country out of recession, and by significant margin. Canada posted marginal 0.4 percent growth. Unemployment fell in November for the first time since April 2008. A strong rebound in home sales activity from year ago levels also points to a firmer stabilization.
With the extension of the $8,000 federal housing tax credit into spring 2010, first-time buyers will now have an additional few months to purchase their dream homes. Expansion of the income restrictions now gives possibilities for higher earners to participate too. And the $6,500 tax credit now available to established homeowners with five consecutive years or more in their homes broadens the opportunity landscape. This in turn will allow the housing market more time to find a more solid footing on a sustainable recovery.
Although economists continue to debate the overall shape of the recovery, it is widely agreed that the U.S. economy will take a long time to rebound. Unemployment is expected to remain high for several quarters and the number of underemployed is expected by some economists to remain a drag on growth prospects. On the brighter side, according to some economists, a slow and steady growth will likely fair better for the long-term well-being of the economy. Slower, sustained growth can help prevent dangerous asset bubbles, like the recent housing and technology bubbles, from growing and bursting.
The Housing Market
Existing Home Sales - Up 24% from last year
Existing home sales recorded another strong gain in October with many buyers rushing to beat the deadline for the first-time buyer tax credit scheduled to expire at the end of November. Sales surged 10.1 percent to 6.1 million units over September sales of 5.54 million and are 23.5 percent above the 4.94 million-unit level seen last year. Sales activity is at the highest level since February 2007 when it reached 6.55 million.
Median Home Price - Very favorable
Low home prices are contributing to extremely favorable affordability conditions. Existing-home price was $173,100 in October, 5 percent higher from its low in January but still 7.1 percent below October 2008. Distressed properties, which accounted for 30 percent of all transactions in October, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes.
Inventory - Lowest level in more than 2.5 years
"We are getting closer to a general balance between buyers and sellers,” according to Lawrence Yun, NAR chief economist. The supply of homes is now at the lowest level in more than two and a half years. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, representing a seven-month supply at the current sales pace, down from September’s eight-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market.
Mortgage Rates – Back at 4.78%
Remaining at attractive levels for people looking to buy a home or refinance, historically low interest rates are boosting the market. Rates for 30-year fixed loans fell to 4.95 percent in October from 5.06 percent the month before. During the week ended November 25, rates again dropped to the low 4.78 percent reached in the spring. As the economy enters its recovery phase and concerns over inflation come back, mortgage rates are expected to go up.
Affordability – Best since 1970s
Unprecedented interest rates, low home prices, as well as the first-time buyer tax credit are lifting the housing market. All these factors combined are “adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970,” according to Lawrence Yun, NAR chief economist. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.
Sources: National Association of Realtors, Freddie Mac
Government Action
New Fannie Mae Policies
"First Look"
In many markets dominated by distressed properties, buyers jumped off the fence in droves and as a result the number of homes for sale in the first tier of the market decreased significantly. When a new foreclosure becomes available for sale, it often is snapped up by investors with cash on hand, leaving the average home buyer looking for a place to live out of luck.
Fannie Mae introduced a new “First Look” initiative to address this and aid in the stabilization of neighborhoods.
During the first 15 days a Fannie Mae REO is on the market, only buyers who will live in the home and public entities committed to the best interests of the community may purchase it.
Buyers will have 45 days to close, up from 30 days.
Earnest money requirement may be reduced.
This will hopefully give the average home buyer a greater chance of purchasing foreclosures and provide support to hard-hit neighborhoods, because owner-occupants are more invested in the long-term vitality of a community whereas investors typically are more invested in their monetary return from the property.
Increased Credit Scores
Fannie Mae is raising its minimum credit score from 580 to 620. This risk management measure will help protect Fannie Mae from future defaults and foreclosure by raising their standard and accepting less risky loans.
While risk management is a sound and healthy approach for an entity that the economy depends on, this underscores the importance that potential home buyers check their credit report early in the process, allowing more time to clear up any errors.
Earlier this year, Experian, one of three major credit-reporting bureaus, began exclusively providing complete credit report information when purchased directly from Experian or obtained from the government annual credit report.
Source: National Association of Realtors
FHA Signals Efforts to Manage Risk
In an effort to secure its financial health, the Federal Housing Administration plans to require borrowers to have more “skin in the game” soon. Over the past three years, FHA’s market share has boomed from about 2 percent of all new loans to about 30 percent of all new loans this year and 20 percent of refinances. The escalading volume that the administration is currently handling calls for stricter requirements as evidenced by FHA’s capital ratios falling to nearly 0.5 percent well below the minimum of 2 percent.
The agency is still analyzing the levels and time frames it wishes to tighten its standards but they expect to:
Increase minimum down payments
Increase minimum credit scores
Increase insurance premiums
Lower the amount of seller concessions
As one of the major players in the mortgage market, the health of FHA is imperative to the housing market and flow of credit to home buyers, as well as to the health of the overall economy. Taking measures to safeguard the agency from needing a government tax payer-funded bailout is a notable risk management measure.
According to a Keller Williams research study, the typical first-time buyer put down 3.5 percent this year. Those who want to take advantage of the tax credit before the April 30 contract, June 30 closing deadline may want to beef up their savings and check their credit report now in anticipation of any changes.
Sources: National Association of Realtors, KW Research First Time Home Buyer Survey
Topics For Buyers & Sellers
First Time & Distressed Property Home Buyers
What are other first time buyers doing?
The tax credit extension and expansion in November has fueled new discussion about home buyers and the housing market in 2010. Here’s a look at first-time buyers in 2009.
The median age is 28, significantly down from where it was in 2005 at 32.
Location or Neighborhood was the No. 1 “must-have” for 36% of buyers.
2 out of 3 sellers paid at least part of the buyer’s closing costs.
76% used their own savings for the down payment.
1 in 4 had help from their family for the down payment.
As elevated levels of distressed properties are expected to continue for the next few years, here is a glimpse of buying a distressed property:
27% of foreclosures* were purchased by investors.
47% of distressed* properties were purchased by first-time buyers.
89% of those first time buyers that purchased a distressed property were motivated by the $8,000 tax credit.
7 in 10 agents have seen an increase in multiple offers.
Approximately 3 out of 5 agents discuss the differences between buying distressed and traditional properties at the buyer consultation.
* Distressed – Short Sale and REO, Foreclosure – REO Only
Contact Alicia & Jeff,
your local real estate experts,
for information about what's going on in our area.
Newsletter Contents
1. Commentary
2. The Housing Market
3. Government Action
4. Topics for Buyers
and Sellers
Monday, November 30, 2009
First Time Homebuyer Tax Credit Information- Updated!
Blogging From The Desk of Alicia Lagarde-Craig
A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers. The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The maximum credit amount remains at $8,000 for a first-time homebuyer ; that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. But the new law also provides a long-time resident credit of up to $6,500 to others who do not qualify as first-time homebuyers. To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.
Income Limits Rise the new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. New Requirements Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law: · Dependents are not eligible to claim the credit. No credit is available if the purchase price of a home is more than $800,000. A purchaser must be at least 18 years of age on the date of purchase. For Members of the Military Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011. For more details on the credit, email me at AliciaLagarde@kw.com or you can call 504-382-3724.
A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers. The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The maximum credit amount remains at $8,000 for a first-time homebuyer ; that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. But the new law also provides a long-time resident credit of up to $6,500 to others who do not qualify as first-time homebuyers. To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.
Income Limits Rise the new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. New Requirements Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law: · Dependents are not eligible to claim the credit. No credit is available if the purchase price of a home is more than $800,000. A purchaser must be at least 18 years of age on the date of purchase. For Members of the Military Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011. For more details on the credit, email me at AliciaLagarde@kw.com or you can call 504-382-3724.
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