-
So your house is worth less then you paid for it. Maybe the value has dropped thirty percent or more. Are you thinking of just walking away from it because you feel you are just wasting money?
If that seems like a silly question to you, it’s surprising to me how many people are actually saying that to me. When they pose that question, I ask them why they bought a home. Did they buy the home to live in or to make a fast buck? I can’t seem to get a straight answer other then the value of their home has depreciated. So here’s what I think:
History has shown that real estate goes up and down. We are in a down cycle right now. In the 1980’s people were saying the same thing to me. I’m going to bail out of my house, it’s worth less then I paid for it. Well, houses are worth more now than they were in the 80’s. Prices will increase in the near future. So here are some reasons to stay in your home. Pride of Ownership This means you can paint the walls any color you like, attach permanent fixtures and decorate according to your taste. Home ownership gives you and your family a sense of stability and security. Appreciation While this may sound silly with the real estate market decreasing in value at the present in real estate has its cycles. Long term it will increase in value, that’s a given. Why do you think so many investors are buying homes now? They realize this is a buying opportunity of a life time. They are there to make money. Holding on to your house will make you money in the long run in my opinion. If you walk away from your home now, you wouldn’t be able to buy another one for three to five years. Back to renting and your credit score drops like a rock.
Mortgage Interest Deductions Yes you can deduct the interest on your mortgage. Home ownership is a superb tax shelter and our tax rates favor homeowners. Interest is the largest component of your mortgage payment. Check with your accountant on this deduction. Property Tax Deductions IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.So my advice to you is, even if your house is worth less then you paid for it, so what, you have a place of your own to live in. Values of real estate will go up and it’s far better to have a place to call your own then it is to rent.
Category Archives: Real Estate
Banks Banking Their Foreclosures?
Are the banks holding off putting some of their foreclosures on the market? It looks like they might be to keep the prices of the real estate market from plunging further. Another reason could be that it helps them appear more solvent then they really are.
According to the San Francisco Chronicle
“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.”
“There is a real danger that there is much more (foreclosure) inventory than we are measuring,” said Celia Chen, director of housing economics at Moody’s Economy.com in Pennsylvania. “Eventually those homes will have to be dealt with. If they’re all put on the market, that will add more inventory to an already bloated market and drive down home prices even more.”
In November of last year, Fannie Mae and Freddie Mac ordered their loan servicers and attorneys not to evict about 16,000 troubled borrowers or sell their homes until they implement a streamlined loan modification program. This might prevent some foreclosures, but the numbers of homeowners facing foreclosures have increased since then.
Where’s the bottom? As I posted yesterday, there are some signs of increased sales and improvement in the economy, so maybe we’re there and maybe not.
Signs of Life in the Real Estate Market
I keep track of the number of pending real estate sales in Nevada County daily and have noticed a healthy increase in pending sales lately. Although many of the sales are short sales and foreclosures, other properties are moving as well. With real estate market values depressed to its present level, buyers are coming back to the market. This includes first time home buyers and investors sensing a buying opportunity of a life time.
According to Rismeida:
“A run of encouraging economic reports that have recently been released may mean the worst, panic-inducing stage of the economic downturn is over. Emphasis on the word may. “I think there are signs of economic life,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, PA, said. “The downturn is no longer intensifying, and the clearest evidence of this can be found in the retail sector as retail sales have turned since the beginning of the year,” Zandi said.
New-home sales in February jumped 4.7% to an annual pace of 337,000 from a record low in January. February marked the first increase in sales since the summer, and the report added to a string of “better-than-expected” housing data, according to Wachovia Bank economist Adam G. York.”
I believe foreclosures will continue into the next year, as the Alt-A loans come due for readjustment. Some figures indicate that there may be as much as $600 billion in foreclosures still to come from the Alt-A mortgage loans made in the 2006-2007 years. Alt-A loans were the love child of lending institutions and Wall Street when subprime loans were getting a bad name. The subprime loans were repackaged as Alt-A mortgage, bundled and sold to investors. A majority of these bundled loans are now toxic and due to fail.
Mortgage Brokers Can Cost You More Money
Using a reputable mortgage broker can save you time and remove some of the hassle in obtaining a loan. However according to a study by the Department of Housing and Urban Development published last year, you may wind up paying more for your loan.
According to the study, borrowers paid about $300 to $425 more in fees when they worked with a broker as opposed to working directly with a lender.
If you are a home buyer, you may want to investigate mortgage options as opposed to using a broker by comparison shopping. This can be tricky, but be sure to include at least one credit union, a community bank and multiple national banks. You may have to spend several days doing this before you find just the right loan.
You should compare one type of loan at a time–for instance, a 30-year, fixed rate with no points. Their research should include a request for a guarantee that both the rate and the good-faith estimate will be exactly as initially presented. This standard could be difficult for a buyer to find, but it’s worth trying to find it, experts say.
If you get too confused, you can always go to a mortgage broker, they have access to multiple lenders and can lead you through the lending process rapidly.
The Sad Face of a Foreclosure
I was recently asked by an Eastern Bank to do a brokers professional opinion (BPO) as to the listing value of a property. This is not an appraisal, but a value based on six properties that are similar, three recently sold and three that are active that would compete for the property for which the bank wants a listing value.
We had done an earlier BPO on this property several years ago when the home owners were in the process of building their home. The bank had given them a loan to build their home and the homeowners wanted additional money to finish their home.
The market at that time was red hot and the value for additional financing was there, based on the value of similar properties in the area. What a change, going back there now, the owners had left, leaving behind their dreams, broken like the thousands of pieces of garbage they had left behind. Yes, they had left behind a home unfinished, garbage strewn all over the property, vehicles left behind that had been cannibalized. To further complicate matters, it is off the power grid, and the home was provided power by a generator and solar panels, all of that gone, leaving behind only one battery in the living room.
The kitchen was unusable, with the stove inoperable, and in a big mess. I would estimate that before the bank can even put this house on the market, it is going to cost $15,000 to clean up the garbage, haul away the vehicles, (including a trashed RV). Due to the poor workmanship on the home, the home being off the grid, the cleanup necessary, the bank is going to lose a tremendous amount of money. Of course, this foreclosure will further depress the market in the area, as all foreclosures are doing to all of our property values.
Foreclosure Crooks Close To Home
In the continuing fight against scam artists, the Better Business Bureau of Northern California is warning consumers about bogus loan modification companies that make promises about helping borrowers modify their mortgage loans.
You don’t have to look far from home to find one such company, which according to BBB is ShortRefiNow.com located in Roseville, CA. According to BBB, fourteen people have filed complaints with them. The complaints allege that the people paid between $2,600 and $5,300 up front to ShortRefiNow.com to get their loan modified, but the company did not perform or refund their money.
One woman said she gave ShortRefNow.com $3,000 up front to modify her loan based on a recommendation from a friend. She stated that “I kept getting the runaround. They said “I’m not sure who’s taking care of it. The person taking care of it had emergency surgery,” At that point she said “you know when someone is lying.”
After checking with her lender, she found out they had made one call to the lender and asked how do you do a refinance?
According to KCRA 3:
“Another homeowner told KCRA 3 she paid $5,370 to ShortRefiNow.com to modify her loan. She said the company told her not to talk with her lender directly.
She said the company did not secure a loan modification and did not refund her money.
The Department of Real Estate said consumers need to be very careful when deciding to use a loan modification company.
Companies must be licensed with the DRE. Furthermore, in order to collect advance money, brokers must have a specific agreement called an Advance Fee Agreement, approved by the DRE. Brokers may not collect advance fees if a notice of default has been recorded against a property.”
The DRE issued a Desist and Refrain order against ShortRefiNow.com in February, telling them to stop performing any and all acts for which a real estate license is required until such time as they obtain the required license.
The DRE said borrowers should contact their lender directly to try to work out an agreement or work with a nonprofit housing counselor.”
Nevada County Residential Sales First Quarter 2009 Vs First Quarter 2008
Nevada County residential property values continued to drop, although not as much as other areas. The drop in prices for the first three months of this year compared to the first three months of 2008 is eleven percent.
The medium price in the first quarter of this year for residential property is $302,000 compared to last year’s first quarter of $345,000. The number of residential properties sold in the first quarter was 124 units compared to 141 units in the first quarter of last year or a fourteen percent drop in sales.
However, I notice that pending sales is up in the first quarter of this year compared to the first quarter of last year. In the first quarter of this year, there are 192 units under contract compared to 171 units under contract last year. This may indicate that there is a twelve percent increase in sales, although some may fall out of contract. There also may be a long time lag on sales because some of the sales may be with lending institutions that historically seem to take more time in completing their transactions.
Sales figures quoted above are for single family residences and do not include multi-family residences.
I keep track of the daily Nevada County MLS transactions on this web site through Twitter, listing the number of new properties on the market, the number of price changes, completed sales for the day and pending sales. These figures are for all types of property
You may find that information on the right side of this page or you can follow me on Twitter, I’m odelljohn.
California Association of Realtors® Launches Mortgage Protection Program
The California Association of Realtors has created the Housing Affordability Fund which offers a new mortgage protection program to first-time home buyers.Through the Housing Affordability Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month for up to six months to help make their mortgage payments.
A Qualified co-buyer can also participate in this program, for a reduced monthly benefit of $750 per month for up to six months in the event of a job loss. Program benefits also include coverage for accidental disability and a $10,000 death benefit. C.A.R.’s Housing Affordability Fund is dedicating $1 million toward its Mortgage Protection Program, and estimates that up to 3,000 families will benefit from the program this year.
To qualify for the Mortgage Protection Program, applicants must:
Be a first-time home buyer – someone who has not owned a home in
the last three years
· Open escrow April 2, 2009, or later, and close on or
before Dec. 31, 2009
· Use a California REALTOR® in the transaction
· Purchase the property in California
· Be a W-2 employee, cannot be self-employed or military personnelHome buyers must request an application for the H.A.F. Mortgage Protection Program from their Realtor®. More information on this new initiative will be forthcoming. Check for updates By the way, a Realtor® is a real estate agent who is a member of the National Association of Realtors or N.A.R. Realtors® are pledged to a strict Code of Ethics and Standards of Practice.
Foreclosures Up 30% in February
Although several major lenders have temporary halted foreclosures, the number of households threatened with losing their homes rose 30 percent in February from last year’s levels. RealtyTrac reported Thursday.
Nationwide, nearly 291,000 homes received at least one foreclosure-related notice last month, up 6 percent from January, according to the Irvine, Calif-based company. While foreclosures are highly concentrated in the Western states and Florida, the problem is spreading to states like Idaho, Illinois and Oregon as the U.S. economy worsens.
“It doesn’t bode well,” for the embattled U.S. housing market, said Rick Sharga, vice president for marketing at RealtyTrac, a foreclosure listing firm. “At least for the foreseeable future, it’s going to continue to be pretty ugly.”
The rise in foreclosure filings came despite temporary halts to foreclosures by Fannie Mae and Freddie Mac, and major banks JPMorgan Chase, Morgan Stanley, Citigroup and Bank of America. Those companies pledged to do so in advance of President Barack Obama’s plan to stem the foreclosure crisis, which was launched last week.
It’s my opinion that the Al-A loans, are now starting to hit home. Al-A loans were the re-wrapped subprime loans that lending institutions came up with when the subprime loans were starting to get a bad name. There is an estimated $600 billion in residential mortgages that are due to fail that were made in 2006-2007 because of the Al-A loans.
The Most Expensive Residential Listing in America
According to several news sources, the most expensive residential listing in California and the United States is the home of Candy Spelling, widow of legendary TV producer Aaron Spelling. It’s the largest house in Los Angeles County. A few statistics:
Size 56,500 square feet, slightly bigger than the White House
Three Stories
Called the Holmby Hills Estate, also known as “The Manor”
Style: Looks like a French chateau
The home has a kitchen in which you can cook for 800, an automated projection room, a bowling alley, a flower cutting room, a wine cellar/tasting room, a silver storage room with humidity control. There’s also a service wing to house the bedrooms of five maids two butlers’ suites, one which has a kitchenette. The house is believed to have more than 100 rooms. Spelling said she isn’t sure, she never counted them.
On the outside, there is a parking lot, dubbed the “motor court, which can accommodate 100 vehicles, with 16 carports to boot. There’s a swimming pool with a pool house, tennis court, a koi pond, gardens, and a citrus orchard.
It’s all become a little too much for Spelling, 63, who is downsizing to a 16,500-square-foot condo in Century City.“All the stars came through,” Spelling said of her 18 years in residence. “Prince Rainier, Prince Charles, Jackie Kennedy — every star from every one of Aaron’s shows.
Fred Sands, who once owned one of the nation’s largest real estate brokerages and is now a commercial real estate investor, said prices for houses like the Spelling property tend to be set largely at the seller’s whim — and the listing price could be far from the eventual sale price. “A broker is capable of saying, ‘It’s listed at 150, but make me an offer,’ ” Sands said, “They’d have a better chance at $60 million, $70 million, but it’s an iconic property — who’s to say?”
Yes, it would be hard to make a comparable sales price on this home, since there is nothing like it on the market. I wonder if guests are given GPS devices when they vist so they won’t get lost?