Comprehensive Housing Market Analysis

Click on the link to read a Comprehensive Housing Market Analysis provided by the US Department of Housing and Urban Development. This analysis has some interesting fact and figures.

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Green Tip of the Week

Check back often, as I will be posting new Green Tips weekly.

Here is your Green Tip for this Week…

Natural deterrents to ants include dry Cream of Wheat, which they cannot digest and is lethal to them, as well as powdered borax mixed with maple syrup (don’t use the latter if you have children or pets). If the aim simply is to deter, but not kill, then sprinkle the substances they don’t like to cross, such as ground black pepper, chalk, or cinnamon, near doors.

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No More State Tax on Forgiven Debt

NO MORE STATE TAX ON FORGIVEN DEBT

Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification.  Enacted into law yesterday, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief income with federal law.  For debt forgiven on a loan secured by a “qualified principal residence,” borrowers will now be exempt from both federal and state income tax consequences.  The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence.  It includes both first and second trust deeds.  It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.

The tax breaks apply to debts discharged from 2009 through 2012.  Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions.  Most notably, taxpayers who are bankrupt are exempt from debt relief income tax.  Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage.  The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

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Market News in Real Estate

CNN Money reports. . .

Nab a real estate deal – while you still can
The combination of affordable home prices, low interest rates, and the federal tax credit for home buyers have created an opportune time for many buyers to purchase a home. Many real estate analysts also believe that most housing markets have stabilized, but that some markets may decline further.

Keep this in mind. . .

• Buyers should keep in mind that housing markets are local and can vary greatly from one neighborhood to the next. Working with a REALTOR® familiar with the area in which the buyer is searching can help the buyer select a house that best suits their needs.

• California’s housing market has shown signs of stabilization since early last year. Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009. In January, California’s median home price was 17.2 percent above the low for the current cycle.

• The federal tax credit for home buyers was extended and expanded late last year. Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 on homes purchased before April 30, 2010. Repeat buyers may be eligible for a tax credit of up to $6,500. Visit www.irs.gov/newsroom/article/0,,id=187935,00.html for more information about the federal tax credit for home buyers, including eligibility requirements.

• The Federal Reserve has helped maintain low interest rates, which, in turn, has assisted home buyers. However, the agency plans to stop purchasing mortgage-backed securities at the end of this month, which likely will increase rates on 30-year fixed mortgages. Buyers may be able to lock in a low interest rate by working with their lender.

To read the full story, please click here:

The New York Times Reports. . .

Program will pay homeowners to sell at a loss In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: Paying some of them to leave.

To read the full story, please click here:

The Wall Street Journal Reports. . .

Home supply increased in February
The number of homes listed for sale increased in many metropolitan areas in February.

To read the full story, please click here:

The San Francisco Chronicle Reports. . .

Strategic defaults on homes on the rise
The number of people choosing to cut their losses on their homes continues to rise. Studies estimate about one-quarter of all defaults are voluntary “walkaways,” also know as strategic defaults and jingle mail (for the sound the abandoned keys make in the mailbox).

To read the full story, please click here:

The Wall Street Journal Reports. . .

Home-saving loans afoot
Pressure is growing on U.S. banks to ease terms for distressed homeowners on home-equity loans and other second-lien mortgages.

To read the full story, please click here:

The Wall Street Journal Reports. . .

Borrowers miss out on billions in savings
The Federal Reserve has pushed mortgage rates to near half-century lows, but millions of U.S. homeowners haven’t benefited from that because they can’t—or won’t—refinance.

To read the full story, please click here:

What you should  know about the market. . .

• Homeowners wanting to pay off their mortgage earlier than planned can do so by making extra principal payments. One extra full principal and interest payment a year will reduce a 30-year loan to about 17 years, and adding the following month’s principal payment to the current one will cut the loan almost in half. It is important that borrowers tell their lender the extra money is to be credited to principal. Homeowners should keep records of their payments and review it once a year to be certain the lender has followed directions.

• Private mortgage insurance (PMI) generally is required for home buyers whose down payment is less than 20 percent. PMI is added to the mortgage payment each month to protect the lender should the borrower default. By law, PMI must be canceled automatically when the loan balance reaches 78 percent of the home’s original value. However, some lenders are allowing borrowers to cancel this coverage when the balance declines to 80 percent of the current value, as long as the loan is at least five years old. Borrowers who have made their payments on time each month for five years should contact their lender or loan servicer to obtain all the details on canceling the coverage.

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Market News in Real Estate

The Los Angeles Times Reports
Shopping for a loan? A good faith estimate will protect you.
Beginning Jan. 1, the Dept. of Housing and Urban Development (HUD) required lenders to issue Good Faith Estimates to protect consumers applying for mortgage loans. Some loan officers, however, sidestep the new requirement by giving their initial quotes on informal worksheets that carry no federal consumer protections. It is important that consumers understand the differences between the federally mandated good faith estimate form and a lender’s informal worksheet.

Keep this in mind. . .

• Last month, HUD told lenders and loan officers that under no circumstances can worksheet quotes be issued to a mortgage applicant in lieu of a good-faith-estimate form.Under the new law, once a mortgage applicant supplies the essential application information, including Social Security number, property address, and estimated value, among other data, lenders must issue a binding-cost good-faith estimate. Once this information is provided, lenders are required to issue the good faith estimate within three days of the application.
• Under the new law, once a mortgage applicant supplies the essential application information, including Social Security number, property address, and estimated value, among other data, lenders must issue a binding-cost good-faith estimate. Once this information is provided, lenders are required to issue the good faith estimate within three days of the application.

• Loan officers cannot refuse to provide a good faith estimate to an applicant who requests one, nor can they tell applicants that they must commit to moving forward with their mortgage company to obtain a mortgage prior to receiving a good faith estimate.

• Once an applicant has received a good faith estimate, they can take the form with them to comparison shop. The new form includes itemized boxes allowing mortgage applicants to compare quotes from up to four lenders, such as interest rates, loan fees, prepayment penalties, and total settlement expenses.

• The good faith estimate also ties upfront estimates to later charges at closing, and encourages borrowers to check line by line for any discrepancies. The form explains which fees come with zero tolerance for changes between upfront estimates and closing—generally the lender’s own fees and local transfer taxes—and which fees allow a 10 percent fluctuation for changes higher than the estimate, such as certain title and closing-related services.
• Some worksheets resemble good-faith estimates, but have titles such as “estimated settlement costs” at the top of the page. Others indicate on the bottom of the form that the worksheet is not a good faith estimate, so consumers should carefully review documents before making any decisions.

To read the full story, please click here

The Mercury News Reports
Refi program for underwater homeowners gets another year.
The government is giving homeowners another year to refinance their loans under a little-used program designed to help borrowers whose homes have plummeted in value.

To read the full story, please click here

Bloomberg News Reports
Home prices decline 1.2 percent, smallest drop in two years.
U.S. home prices fell 1.2 percent in the fourth quarter from a year earlier, the smallest loss in two years, as a federal tax credit for home buyers boosted demand.

To read the full story, please click here

The Wall Street Journal Reports
Bid to curb mortgage tax break falters.
The latest effort to scale back some tax deductions on mortgage interest, one of the nation’s most-enduring tax breaks, is finding little support in Congress.

To read the full story, please click here

The Los Angeles Times Reports
Many borrowers in default stay put as lenders delay evictions.
Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.

To read the full story, please click here

The New York Times Reports
Another foreclosure alternative.
Homeowners on the verge of foreclosure will often seek a short sale as a graceful exit from an otherwise calamitous financial situation. Their homes are sold for less than the mortgage amount, and the remaining loan balance is usually forgiven by the lender.

To read the full story, please click here

The Washington Post Reports
Consumer optimism seen with January rise in spending.
Perhaps the lessons of the Great Recession are not so deep-seated after all. Consumers spent more and saved less in January, according to government data released Monday, a sign that Americans feel increasingly secure about their financial situation, economists said.

To read the full story, please click here

The Wall Street Journal Reports
Freddie Mac abandons ship on interest-only loans.
Freddie Mac said on Friday that it would stop buying and securitizing interest-only loans in September because those mortgages have performed so poorly.

To read the full story, please click here

The Mercury News Reports
Increasing numbers of Californians are suing lenders to avoid foreclosure.
In the last five years, the number of foreclosure lawsuits filed in federal courts in California has ballooned—like an exploding adjustable-rate mortgage—from only 29 statewide in 2005 to nearly 1,400 last year.

To read the full story, please click here

What you should know about the market. . .

• When house hunting, first-time buyers are advised to create long-term budgets to help estimate costs of homeownership. Items such as taxes, insurance, utilities, closing costs, appraisal fees, escrow fees, homeowner’s insurance fees, and moving costs should be included in the budget.

• A common mistake many home buyers make is being too close-minded while searching for a home. To avoid this, home buyers should sit down with their REALTOR® and create a needs/wants list. Thelist should include items that are must-haves or deal-breakers, as well as those that are not necessary, but would be nice to have in the home.

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