SubscribeTax Credit Extended, Markets Further Stabilizing and Real Estate Ideal Hedge
November 11, 2009
Tax Credit and Conforming/FHA Loan Limit Extended
Made official on Friday, the tax credit for home purchases was extended through July 1, 2010 and the important details are exactly as they were in my post on Friday the 30th of October, which was summarized as follows:
· Effective on binding real estate contracts from December 1, 2009 through April 30, 2010, The tax credit would be $8,000 for first time home buyers and $6,500 for move-up buyers who have owned their current home for at least five years
· The tax credit expires on April 30, 2010; however, if a binding contract is reached by April 30, 2010, buyers have an additional 60 days to close the deal and still be eligible for the tax credit
· For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return
· The income limits for both first time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.
· Cost of the home may not exceed $800,000 to be eligible.
Remember that a tax credit has about THREE TIMES the impact of a tax deduction, which allows someone earning $125,000 per year to be taxed on about $102,000*. And since other items like interest and property taxes are also deductible*, that same individual may be looking at less than half of their earnings being fully taxable..!*
Add the above news to the fact HUD also extended the conforming loan limit of $729,750 in the Bay Area to December 31, 2010, and you have a “perfect storm” for every qualified first-time buyer in the Bay Area.
S&P Case-Shiller Confirming Further Improvement of Housing Prices
Released last week, the S&P Case-Shiller index confirms that housing prices continue to improve, especially in areas like San Francisco where the index moved another 2.8% in August to 132.47. This marks the seventh straight month of improvement.
Zillow also reported that their index reflected further stabilization for the third quarter, with over 26% of the metropolitan statistical areas showing signs of improvement.
Real Estate as an Ideal Hedge to Both the “W” Concern and Inflation
You may recall from my last post that we are seeing far more application activity for purchases in the $1mm+ range, especially the $1.5mm to $4mm range. These applications have been coming from our more financially-minded clients, as they not only see tremendous opportunity to obtain a more valuable home, but they are very concerned about a “W”-shaped economic recovery and subsequent inflation. As such, obtaining an upgraded home for less, cheap financing and hedging against inflation make buying a larger home an ideal move. All things being relative, the reality is that the S&P 500 currently has a rather high price-to-earnings ratio at about 19.52 versus the historical average of 15.7. As such, if we were in average economic circumstances, it’s arguable that the stock market is overvalued by about 25%. Given the fact that our current economy is FAR from being in average condition, it’s anyone’s guess just how overvalued the stock market is. All I know is that my savviest, financially-minded clients think that the stock market is due a correction and that real estate is a great asset to have as a hedge against both a market correction and inevitable inflation.
Fannie’s New Program: Deed for Lease
Announced on November 5, Fannie Mae is helping those qualified applicants to essentially sell and lease back their current home. This program is also applicable to investment-property owners who are facing foreclosure and wish to deed the property over to the lender and allow the renters to continue renting at market levels.
Rates and Activity
- Rates continue to run as low as 3.75%, depending on a number of different factors, with the conforming 30-year at just under 5% and the jumbo 30-year at about 4.75%
- 71% of our transactions last month were purchases, and the average loan was in the $500k range.
- As mentioned above, we’re seeing a heavy trend in purchase applications for the move-up market, but inventory is turning off a majority of those buyers
- We closed a deal in TWO weeks, but we still recommend a 30-day closing period
- If you or someone you know prefers to pay cash for a purchase, then finance that purchase within 90 days to protect valuable tax advantages, we can help, as we have programs that DO NOT require 6 months seasoning and pricing is based on purchase money, NOT a cash-out refinance
* Does not constitute tax advice. Please seek any qualified tax professional for proper guidance.
Fire Engine Red, A Proud Fixer Upper, and More Eichlers: All in a Day’s Palo Alto Real Estate Tour
March 23, 2007
Chomping at the bit to go, I headed straight out of this morning’s broker marketing meeting to see what the new Palo Alto inventory looks like. The outcome? Inventory is definitely on the rise, with both statistical proof (the Altos Research chart on the left) and the general buzz and business of everybody touring around today.
With six homes on my list — scattered throughout town — and only two hours on my calendar, it was all about efficiency.
First up was 1045 Newell, an “original Barrett & Hilp home,” a Leannah Hunt (Coldwell Banker) listing in the Green Gables neighborhood. $1.25M gets you 3 bedrooms, 2 bathrooms, 1500 sq ft, and a quick 5-10 minute drive on Embarcadero over to the 101. A trust sale home and not particularly updated — but well-staged, per Leannah’s custom — this home awaits the next generation of Palo Altan home owners.
Then it was across Embarcadero and Oregon over to South Palo Alto to see another Coldwell Banker listing — this one from Robert Lane — at 2898 Louis Road. “This one has charm,” says the listing, and it would be hard to argue with that. It has 2 bedrooms and 2 baths squeezed into just under 1000 sq ft, so the next owner will most likely want to expand — but since it’s a corner lot, the only way to do so and still keep in line with Palo Alto’s setback laws may be to go into the side yard.
Just south of this Louis Road listing was 770 Allen Ct, a fixer upper and proud of it. The listing agent, Steve Greenbaum from Keller Williams (another technophile like myself!) explained that a contractor actually lived in the property in its current condition — something I’m not sure I could have done even in my Peace Corps days — but simply didn’t finish the project. The bones of the home look good, and the yard is large, though in need of some TLC. An old fashioned pot-bellied stove in one of the rooms awaits the new owner.
Then there’s the fire-engine red Eichler at 3924 Louis. Nancy Goldcamp (Coldwell Banker again — what’s with this? Did Alain Pinel go out of business?) brings us this $1.175M 3/2 1900 sq ft, adorned with a great kitchen, and with all the light you would expect from an Eichler. Great staging, though tragically not done by my friend Ann O’Connell. Oh well, we’ll give her a few more years to completely corner the market.
Rounding out my tour today was another small property begging for a facelift or perhaps even a complete organ transplant. 3176 Emerson is, as the listing agent Richard Cottrell himself describes it in the MLS, a real fixer upper on a terrific lot in a great neighborhood. Folks living outside of this fantasy land we call the Bay Area may be shocked that a fixer-upper — and an 840 sq ft one at that — is not only on the market at $935,000, but will in fact probably sell with multiple offers, well above that price.
