Delaware Beach Real Estate: October 2008

The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool at your disposal to encourage potential buyers to jump off the fence and get into the real estate market.

When you combine the tax credit with today’s low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for your customers to buy now. But tax credits can be confusing. To help your clients understand how the credit works and why it would help them, you must learn the details.

Here are 6 things you should be able to explain to prospects and clients:

1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

2. Buyers don't really have to be "first-timers."
The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.

3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if your clients make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.

4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.

5. You don't have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.

6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.

NAR Asking Congress to Expand Credit
As mentioned above, NAR has asked Congress to do away with the repayment provision of the first-time buyer tax credit and expand the credit to all home buyers, not just first-timers. The proposals were part of a four-point housing stimulus plan the association submitted in mid-October.

“Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible,” said NAR President Richard F. Gaylord. “It is vital to the economy that Congress take specific actions to boost the confidence of potential homebuyers in the housing market and make it easier for qualified buyers to get safe and affordable mortgage loans.

By Robert Freedman, Realtor Magazine, November 2008

Time to Appeal That Tax Bill?

If home price drops, so should property taxes. Home owners might be smart to initiate a property tax appeal.

In these uncertain times, many home owners have had to face the fact that the current market value of their homes is less than they once thought.

Yet, most of these home owners continue to pay property taxes based on that higher value.

Higher taxes may also make a property less appealing and affordable to buyers, since higher taxes will increase their overall costs, at least until the property is reassessed. That’s why it’s a smart strategy to advise past clients who might be considering a sale to appeal their property taxes at the next opportunity.

Evaluating Your Assessment

The vast majority of taxing jurisdictions throughout the United States assess residential property based on market value: the amount a willing buyer would pay a willing seller without duress. However, assessments are generally not reviewed on an annual basis, so a property’s assessment will never be 100 percent of market value.

To compensate, taxing bodies apply an equalization ratio, which is designed to ensure that assessments are relatively equal among different taxing districts to all assessed values. For example, a property worth $100,000 with an equalization ratio of 50 percent would be assessed at $50,000. Home owners can obtain their equalization ratio from local taxing authorities.

If, after a review with a residential broker or appraiser, a home’s assessed value seems out of line with current market values, the home owner should undertake an investigation to determine what might have caused the incorrect valuation. Here are some steps for your client to follow.

1. Arrange a visit with the local tax assessor and request a complete copy of the home’s tax records. Property record cards are public records and are universally available.

2. Pay particular attention to the market comparables listed on the property record card. These recently sold homes are the basis for the assessor’s valuation of your client’s home. Visit those houses or view them online, and compare them to the client’s house.

3. Take the appropriate equalization ratio and multiply the market value you believe appropriate for the home by that rate. If the number is lower than the current assessment, your client should file a tax appeal.

Filing an Appeal

Most home owners should be able to properly file the appeal without counsel, but most jurisdictions require a licensed real estate appraiser to prepare an expert analysis of local market values for the local tax board.

Home owners should work closely with the appraiser to review all the amenities and issues that might affect the valuation of their home. Many times an appraiser may not be aware of construction, zoning, or general neighborhood issues that negatively affect value.

Real estate brokers familiar with the property and the area may also be a valuable resource for this type of information. They may also be able to assist the appraiser in determining which properties are the best comparables for a particular home. All of the appraiser’s conclusions need to be properly documented with supporting evidence in the appraisal report that will be submitted with other supporting paperwork prior to the hearing.

In addition to compiling evidence, the taxpayer should take care to learn and follow the rules of the local board of assessment review. Each taxing jurisdiction has appropriate appeal forms. It is also critical to determine the deadline for filing an appeal.

The final step in an appeal is a hearing before the assessment appeal board. Proper preparation is the key to a successful hearing. The home owners and the appraiser should prepare a script detailing the important points that need to be made during the appraiser’s testimony in order to prove a lower market value and assessment.

The key focus should be comparing the home in question with every presented comparable. The appraiser should be prepared to analyze each important amenity and discuss how it positively or negatively affects value.

During uncertain economic times, the effort of appealing a property tax bill reduction may prove well worth the time and effort involved.

You can contact the staff of REALTOR® magazine by e-mail at narpubs@realtors.org.

New home sales tick up 2.7%

Ok, so the real estate market is still gloomy, but these random weeks of rallying and regaining suggest that perhaps, just perhaps, the end is near. The stock market is a mess, the war is sucking the life from our budget, banks are failing left and right, while the CEO's take home millions for their contribution to the failure, the economy is in a state of turmoil .. but the mortgage industry is recovering -- there is an increase in applications -- and the housing stats are positive, if only by a little. This sluggish market can only last for so long before it regains and comes out strong. Perhaps it's had enough, and is trying to spread a ray of light on a rather gray day. This was posted on www.cnnmoney.com, and I found it worthy of blogging!

NEW YORK (CNNMoney.com) -- Sales of newly constructed homes rose in September, according to the monthly report from the U.S. Census Bureau, inching up 2.7% from August to an annualized rate of 464,000.

The reading was above the consensus forecast of 450,000, according to economists surveyed by Briefing.com, and up slightly from the 17-year low in August, which saw 452,000 new home sales.

But the reading was still the worst September for new home sales since 1981. Sales are down 33.1% from September of 2007, and far below the pace of the boom years. In 2005, for example, 1.3 million new homes were sold.

In response to slower sales, home builders have been reducing their production. As a result inventory has fallen, but there were still about 394,000 new single family residences on the market at the end of September. At the current pace of sales, that would take 10.4 months to sell through.

The median selling price for a new home was $218,400 during the month, down from $221,900 in August, while the mean selling price was $275,500, up from $263,900.

Sales up where prices are lowest
"We're clearly seeing some pick-up in regional areas where home prices have fallen," said Mike Larson, a real estate analyst with Weiss Research. "The drops have spawned some bottom fishing."

Indeed, according to the report new homes sales jumped 22% in the West, which has seen some of the nation's steepest price drops, while sales in other regions were down or flat. However, sales in that region are still off nearly 38% on a year over year basis.

Larson added that homebuilders have made a concerted effort to move inventory by rolling out incentives such as free upgrades and reduced rate financing. That means that buyers may be getting even better deals than the lower median home prices indicate.

"The true price decline is probably even greater," said Dave Seiders, chief economist for the National Association of Home Builders (NAHB).

About 65% of homebuilders surveyed by the NAHB report offering customers free upgrades, such as marble countertops, according to Seiders.

Other popular incentives include paying closing costs, which 57% of homebuilders report doing, and buying down mortgage interest rates, a practice reported by 21% of companies. About 24% of builders have even been helping customers sell their existing homes, and 15% are accepting trade-ins.

Although Larson conceded that the latest Census Bureau numbers were positive, he cautioned that they were tallied before the financial crisis fully took hold in mod-September.
"The rest of 2008 will probably not be as good," he said.

More turmoil ahead
Homebuilders seem to agree with that assessment. Earlier this month, the NAHB reported that builder confidence had fallen to a record low.

"Our surveys of builders show ongoing concern over financial market turmoil," said Seiders, "as well as weakness in the general economy and in the job market."

Two housing industry experts cautioned that the uptick in new home sales, as well as the slight rise in existing home sales reported last week, should be kept in perspective.

"The fact that new houses are selling is good news," said Nicholas Retsinas, of the Harvard Joint Center for Housing Studies, "but monthly numbers are very volatile."

And Patrick Newport of IHS Global Insight points out that these September figures are being compared to a very poor August report.

"The September numbers were a small bounce back from the double-digit plunge of the month before," said Newport. "But what really struck me was that new home sales in the western region were down 38% [year-over-year] while Septembers existing home sales were up 34% in that region."

The problem: New home builders are competing with dirt-cheap existing homes that are in foreclosure. About 40% of sales out west are distressed properties, homes that have been repossessed by lenders or are short sales in which lenders agree to sell a home for less than what is owed on it. Builders, who have to cover their costs, can only slash prices so much.

Add to that the current economic and financial market turmoil - especially job losses - and you have a recipe for hard times ahead in the home construction industry, according to Retsinas.
"The most important factor influencing home sales is jobs," he said. "That does not bode well for the housing market."

Mortgage Applications jump 17%

Interest rates are dropping, sales prices are vulnerable, making it the best time to buy. This is a great opportunity to purchase a new home, an investment property, or a second/vacation home. If you are waiting for the bottom to fall out, you may lose a great opportunity. This was posted on cnnmoney.com today. I found it interesting, and in my own opinion, a sign that perhaps the market is trying to climp out of the hole.

NEW YORK (CNNMoney.com) -- Borrowers streamed back into the mortgage market last week as loan applications jumped nearly 17%, according to a regular survey from the Mortgage Bankers Association.

"Rates were going down last week," said Keith Gumbinger of HSH Associates, a publisher of mortgage information. "There were people, especially homeowners wanting to refinance, waiting to pull the trigger. And as soon as the number went down, they did."

Rates for a 30-year, fixed-rate mortgage fell to 6.06% from 6.46% the week before, according to mortgage giant Freddie Mac (FRE, Fortune 500).

The MBA reported that refinancings accounted 46.9% of all applications, up from 42.6% the week before.

Gumbinger also cited pent-up demand for loans as a factor in driving up applications. That could have carried over from the week ended October 17 when applications dropped nearly 17%, an almost mirror image of last week's rise.

At that time, Freddie reported that rates were near 6.5% - the highest they'd been since August. Many potential borrowers thought that was just too high and decided to wait, according to Orawin Velz, Associate Vice President of Economic Forecasting in the Research and Economics group for the MBA.

But when they fell last week, borrowers pounced.

"They didn't want to miss the chance at the lower rates," said Velz.
Applications were still 30% lower than for the same week a year ago, and Velz said it's unlikely that the jump in mortgage applications indicates any kind of upturn in the housing market, which is still seeing record home price drops.

"I don't believe it's a sign of a rising housing market yet," she said. "Application activity is just very volatile from week to week."

Sussex County Housing Market Remains Positive

According to the Sussex County Association of Realtors, the housing statistics for 2008 thus far are rather positive considering the state of the nation’s economy, rising gas prices, energy costs and interest rates. There have been over 2,400 homes, including townhomes, condos and mobiles, and just under 300 lots sold since January of this year. The county has also seen an increase in commercial sales, which supports the notion that this county is growing and remains a good place to invest in real estate. We have seen a rapid rise in population, and big commercial companies, as well as small local ones, see the potential and economic benefit of investing in this area. This trend only solidifies our local market and will help carry it through the housing crisis. If you have not seen them yet, keep an eye out for local billboards advertising how many homes have sold in the area this year. The numbers may surprise, while comfort you during what seems to be a downhill spiral in the housing industry.

Also keep this in mind the next time you read an article in the paper regarding the current real estate market: Most media outlets are covering the real estate market on a nationwide level. What is happening in Arizona or California is not necessarily the same in Delaware or Maryland. You really must pick apart the article and take into consideration that in more cases than not, it is based on the national market. Best thing to do would be to visit your local Association of Realtors web site and follow the statistics posted there. After all, they are relevant to your community, therefore your local market.

To visit Sussex County, Delaware's location realto association board, please visit www.scoar.com.

The Sussex County Ship May be Sailing...

If you are waiting for the market to hit the bottom, you may have already missed the boat. I stumbled across a wonderful article in the latest issue of Delaware Today that I wanted to post. It talks about how while the nationwide market is somewhat soft, some local realtors feel we have hit the bottom of the market — last year — and are on a very attractive upward climb! Here are some highlights from the article.

- Existing Home Prices were 4.6% higher in the Northeast than they were this time last year.
- Median Home Prices jumped from $400,000 to nearly $600,000 in the first quarter of
2008. So though buying has slowed, home values have increased.
- Home reports from the Spring show existing home prices averaged $261,000, compared to
$270,000 at the height of the 2006 market, so if this is a slip in the market after a peak 2
years ago, then the value is still there.
- The rental market has been healthy this summer, up about 15%, and that in turn has
encouraged visitors to purchase vacation homes.
- The Delaware Beaches are within close proximity to millions of people, and several major cities,
making it a very desirable vacation spot for those not wanting to spend alot on gas prices, and
longer distance travel.

Overall, it was a very positive article, full of statistics, data, and professional advice/opinions.

To read the article in full, please visit http://www.delawaretoday.com/Delaware-Today/September-2008/And-If-You-Buy-Before-Midnight/.

Is the real estate market as bas as they say? NO!

While the media will have you believe we are heading into the depths of a housing gloom, the statistics and data will prove just the opposite. Sure, the current market is not what it was a few years ago, in the height of an incredible, booming seller’s market, but right now, we are in a good place, and can only go up from here.

Let’s look at the facts: Through the second quarter of 2008, the average sales proce in Sussex County was $335,454. The average sales price at the peak of the market in 2005 was $374,000. The total homes sold last year were nearly 3,600, compared to 3,222 back in 2001, at the beginning of the hot market. It is hard to argue that our local market is suffering when you pick apart the data.

We will continue to struggle in the current economy, but if you break it all down and look at it objectively, you will realize that it really isn’t all that bad. We will get through this ahead of the game. We remain strong, and can only become stronger with time and patience. We can only advise our friends, family, neighbors, co-workers and people we pass on the streets to keep their head up high, stay strong, and be patient. There is light at the end of the tunnel, and all I see is a bright light shining ahead.

Home Sales Appear to be Stabilizing

According to a National Association of Home Builder’s article posted in the Nations’ Building News September 8 edition, there is good news in the housing industry.

Recent date suggest that the market may be close to hitting the bottom, and on it’s way up! This recent report comes on the heels of the recent Housing Bill, which has appealed to homeowners and buyers alike in terms of affordability coupled with persistent growth of household income, not to mention the new $7,500 tax credit for first time home buyers, and low interest rates.

Existing home sales rose by 3.1% in July, and new home sales inched up by 2.4%. Some believe the cyclical low may have been reached in June, and are encourage by the recent statistics.
The construction industry has been hit hard with the rise in fuel costs, so we will continue to see a slight decline or flattened market in new homes sales.

The article not only laid out the cold hard facts, but was overall positive in the ultimate outcome and recent stats, laying out the pros and cons while remaining confident that homeownership is a tremendous investment.

To read the article in full, please visit http://www.nbnnews.com/NBN/issues/2008-09-08/Economics+&+Finance/3.html

Lower Rates, Mortgage Applications Increase, Sales Prices Rise

Since the government take over of Freddie Mac and Fannie Mae, the real estate industry overall has seen a rather positive reaction. Mortgage rates have decreased by four tenths of a percent, loan applications have increased by about 10%, with a staggering 14% for loans funded by the two giants. Home sales prices were actually up significantly in several “hard-hit” areas, like California, Florida and the Washington, DC suburbs, and there has been a recent reappearance of multiple bids, which can only suggest that the market has almost corrected itself, and we should begin to see a steady and slow recovery in the months ahead.

To read the full article, please visit http://realtytimes.com/rtpages/20080916_realestateoutlook.htm
Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board’s Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development’s Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation’s journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.

Mortgage Payments to be Slashed

If you write your monthly mortgage check to Countrywide or Bank of America, you may be in good luck. The bank is unleashing a new program that will help homeowners across the nation afford their house. This innovative and aggressive foreclosure prevention program is the first of its kind from any US bank, and will hopefully help those close to losing their home keep grasp on the American dream.

Scheduled to become effective in December, the program caters mainly to the sub-prime and adjustable rate mortgages, but can help all borrowers considering their circumstance and eligibility. The new progam will cut monthly housing payments to no more than 34% of gross income, and hopefully invite other financial institutions to follow suit.

The bank sees this as a way to avoid foreclosures for not only their borrowers, but for the company as well. It is far less costly to cut costs in mortgage programs and interest rates, than to seize homes and sell them through the lengthy and costly foreclosure process. So, if you are a Countrywide or Bank of America mortgage holder, this could be a good day indeed.

To read the full article, please visit the link below.
http://money.cnn.com/2008/10/06/real_estate/Drastic_plan_slashes_mortgage_costs/index.htm?postversion=2008100615

Sussex County Home Sales

Updated October 20, 2008

Well, the local real estate market is in full swing. Homes and businesses are selling, despite the latest news on Wall Street. Last week was busier than the week before, and so on. This shows that real estate is moving, selling, and appreciating. The numbers speak for themselves.

Single Family - 1,293
Condo/Town Home - 527
Mobile Home - 230
Multi-Family - 3
Lots/Land - 276
Farms - 7
Commercial - 52

A total of 2,388 real estate transactions have closed thus far for 2008. The average list price through September 30 is $375,182, and the average sales price is $348,963. Homes are selling at about 93% of list price, and are averaging 193 days on the market.

Sussex County Home Sales

Updated October 26, 2008

The market is slowly moving. Not as much activity as the week before, but we are heading into the cooler months, when the market really stalls. We did have quite a few sales, however.

Single Family - 1,319 (compared to 1,293 on 10/20)
Condo / Town Home - 533 (compared to 527 on 10/20)
Mobile - 235 (compared to 230 on 10/20)
Multi-Family - 3 (compared to 3 on 10/20)
Lots / Land - 284 (compared to 276 on 10/20)
Farms - 7 (compared to 7 on 10/20)
Commercial - 53 (compared to 52 on 10/20)

There were 46 closed real estate transactions last week. Home sales price averages $348,963 as of September 30.

Friday, October 31, 2008

Thursday, October 30, 2008

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