Categoriesfinancing, info for buyers

2009 Year In Review

A recap of the top stories in 2009:

2009-The year of the first-time home buyer
Supported by the tax credit and low interest rates, first-time buyers had an unprecedented showing in 2009 and helped to boost the struggling economy with their aggressive approach to the market.  In the Seattle Metro area, 5950 homes sold in 2009 with an average DOM (days on market) of 59 days.  72% of those homes sold for less than $500,000, 52% sold for less than $400,000 (data from Northwest Multiple Listing Service).

Short sales and Foreclosures
Foreclosures, and the problems created by them, were among the most important stories of 2009.  Coined “toxic assets” these homes were either sitting vacant or creating a flurry of paperwork as first-time buyers and investors competed to find the deal of a lifetime.  Due to defaulting loans, foreclosures in 2009 helped cause the financial collapse, but by year’s end they were appealing to a growing segment of buyers.  Overall, the foreclosure rate in Seattle has remained low compared to the National average.

Low interest rates
The rush to buy was due to a miraculous combination of factors.  Interest rates continued to stay low, setting records as they fell against speculation.  Low priced foreclosures and short sales, and the high inventory of homes on market brought prices down to affordable levels.  Even the luxury market saw deep declines as sellers began driving prices way down.  In 2009, interest rates stayed below 5.5% and in the 4% range for much of the year.

$8000 tax credit and the extended/expanded tax credit
Home sales continued to drop until the Fed stepped in and passed the $8000 tax credit for first-time home buyers.  It took a few months to sink in and then sales shot up around mid-year to their highest levels in more than two and a half years.  Slated to end on November 30, the tax credit was extended & expanded through April 30, 2010 to include homeowners buying their next home, if they’ve lived in their current home at least 5 years. The tax credit is one of the most important stories of 2009.

Below is a graph showing the sales activity for the past 12 months.  The number of homes sold in 2009 is comparable to 2004, as well as median and average price.  The average DOM for the homes sold last year was approx. 78 days, which is skewed high due to the increased length of time to sell short sales.

Warm Regards,

Domenica
Windermere Real Estate

Categoriesinfo for buyers

Homebuyer Credit FAQ’s

Here are some of the most frequently asked questions about the changes to the Homebuyer Tax Credit:

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. For example, individuals who downsize or move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I closed on November 20th. Since President Obama signed the bill before I closed, will I qualify for the new $6500 tax credit?
Answer: Yes. The new income limitations went into effect as soon as the President signed the bill.  The income limit and other eligibility rules will look to your status as of the date of purchase, which is the closing date.  Since the new rules were signed prior to your closing, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range.)

Question: I am a first-time home-buyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. Will I be eligible for a credit?
Answer: Yes. The new income limitations went into effect as soon as the President has signed the bill.  The income limit and other eligibility rules will look to your status as of the date of purchase, which is the closing date. So you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did in the last 3 years doesn’t impact eligibility.

Question: I am an eligible first-time home-buyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Once the legislation was signed, it made it as if the Nov 30 date had never existed. Therefore, so long as the contract closes before July 1, the purchaser will be eligible for the credit.

Categoriesfinancing, info for buyers, Windermere

Windermere’s New Bridge Loan

Opportunities for “move up” buyers are plentiful in the current market. Unfortunately, many homeowners aren’t able to capitalize because it has become harder to access home equity for down payments. Windermere is attempting to address this issue by offering its own stimulus package~short-term, no interest loans to existing homeowners looking to purchase a new home. Windermere clients have access to an interest free “bridge loan” that allows them to borrow a portion of their equity in their current home as a down payment on the purchase of a new home for up to six months. The result: buyers can make a non-contingent offer without dipping into their own cash reserves.

To create this interest-free program, Windermere partnered with Vintage Loans, LLC and is underwriting the costs of this program. “The federal tax credit has helped thousands of first-time buyers purchase a home,” said Jill Wood, President of Windermere Real Estate. “We want to offer a helping hand so second, third and fourth time homebuyers can buy homes as well.”

The Buy Now * Sell Later Loan is open to property owners in Western Washington to use as a down payment on the purchase of a primary residence. The maximum loan amount is $100,000 for six months or $200,000 for 3 months. There is no origination charge, no interest on the loan and no monthly payment required. The loan is due in full when the borrower’s home sells, or when the loan term ends, whichever comes first. Here is a recent article from the Seattle Times regarding the program.

The limitations of this program lie in that the total of all debt secured by the collateral property, including the bridge loan, may not exceed 65% of the collateral property’s current fair market value. The home buyers able to utilize this program must have a good chunk of equity in their current home, and therefore many of our clients may not qualify.

If you have any questions about this new Windermere loan, or if you’d like to discuss the prospect of “moving up” in home in the future, please just give us a call 🙂

Warm regards,
Domenica
Windermere Real Estate

Categoriesfinancing, info for buyers

Low Interest Rates Make A BIG Difference

Right now interest rates for purchases (and refinances) are very low. Though the $8K tax credit is a big contributor to the improved market conditions we are experiencing, the low interest rates actually do more for affordability and buying power. Yesterday, with a client, we looked closer at why interest rates are low right now, and why they will go up in 2010.

This case study based on a 400k purchase with 20% down and 1% loan fee (Loan amount $320K). All third party and other costs will be constant for illustration purposes.

In terms of buying power, an increase in interest rate from 4.75% (current levels) up to 6.25% (late 2008 levels) will cost about $62k in purchase price for the same monthly payment in this scenario. The same payment = $400K versus $338K purchase price.

Rob McAllister (West Seattle Mortgage) explains the recent history of interest rates:

*In December of 2008 the FED announced they would begin purchasing mortgage bonds to help push rates lower and allow people to purchase homes at artificially low rates as part of their efforts to stimulate the housing sector of the economy.

*The mortgage bond purchase program was initially set to expire in July of 2009 after $700B of government funds were exhausted. Rates in June began to move from the mid-4’s (on a 30 year fixed mortgage) to the mid-5’s in a week’s time based on the anticipation of the FED’s program expiring.

*The FED then announced they were going to allot an additional $500B toward the mortgage bond purchase program to extend their efforts until the end of 2009. The FED has been actively purchasing mortgage bonds in 2009 which has kept rates around 5% for much of the year.

*Just last week the FED announced that they would extend the time they plan to continue their purchase plan until the end of the first quarter of 2010, although they did not allot any additional dollars to the plan. This indicates that they plan to phase out the program over a longer period of time to ‘soften’ the inevitable rise in interest rates as they exit the market. Though it should be a more gradual climb, rates will begin to go up based on normal market conditions (no government involvement).

Conclusion: Interest rates are as important as price (or more important) to factor into the home buying equation. We are here to answer any additional questions you have about this topic and hope you will call us as you consider your options.

Warm regards,
Domenica
Windermere Real Estate

Categoriesinfo for buyers

$8,000 Tax Credit “Last Days”

We know we’ve talked about it before, but the November 30th deadline is drawing near.  For those of you still unclear about the tax credit, here is a great short video explaining the credit in detail.  (Please spread this email around to all your friends!)

$8000!
We’ve seen a marked increase in sales this spring and summer and feel that the market is ramping up in these last days before the tax credit expires.

Here is a graph of the Seattle market up to $400k looking back 14 months.  Most first time buyers fall in this price range.  We compare active listings to pending and sold listings to keep a pulse on the market trends.  In this price range there is a trend of fewer homes on the market and more sales compared to the same time last year.

Warm regards,
Domenica
Windermere Real Estate