Real Estate Information

There have been a lot of negative predictions about the housing market recently.  Whether or not these predictions will come true is something that remains to be seen.  While these predictions may be unsettling for some, the good news is that the San Diego County housing market is doing better than the rest of the nation as a whole.  According to the National Association of REALTORS, in the United States in the month of July, home sales decreased by 25.5% from where they were in July 2009.   Here in San Diego, however, home sales have only dropped 15.2% from a year ago.  Nationally, home sale prices only increased by 0.7% from last year, but home sale prices in San Diego County went up 4.6% from July 2009.  In addition to this, San Diego County is also doing better than the rest of the nation in regards to foreclosure activity.  According to RealtyTrac, foreclosures increased nationally by 4% in the month of July but were down 10% from July 2009.  In comparison, foreclosures in San Diego County went up just over 1% in the month of July but decreased by more than 37% from July 2009.

Now that the federal and California state tax credits are gone, home sales have been decreasing.  Even though the tax credit incentives are gone, there are still reasons to buy a home now.
 
1.       Low Prices
Everyone knows that after the housing bubble burst, home prices plummeted.  These low prices won’t be here forever.  Even though the tax credits are gone, if you’re able to, it’s a good idea to take advantage of these low prices before they’re gone.  Or before mortgage rates increase.   
 
2.       Investment Purposes & Low Interest Rates
As previously stated, home sale prices are low, and everyone knows a good investment is made on the "buy side."  If you buy now and hang on to the home for a few years, it is very likely you’ll be able to make a decent return on your investment.  Not to mention that borrowing money right now is ridiculously cheap!  Five to ten years from now, we're all going to be talking about how great interest rates *used* to be and how we wish we had taken advantage of them.  Don't miss that boat!

 
3.       Other Tax Benefits
Even without the tax credits, there are a lot of tax benefits that come with owning a home.   You can deduct your annual property taxes and mortgage interest paid.  When you sell the home, you won’t be taxed on the capital gain unless it is over $250,000 (if you're single) and $500,000 (if you're married) and you make a certain income.  (Check out this blog for a breakdown of how this will work after the Medicare taxes go into effect.)
 
4.       Home Equity
By owning your own home, you can build home equity.  Home equity can give you a line of credit that you can use to make home improvements, send your kids to college, start a business, etc.
 
5.       Other Home buyer Assistance Programs
Just because the tax credits are gone, it doesn’t mean there is no longer help for home buyers.  Here in San Diego, there are several home buyer assistance programs which are listed on the San Diego County website.

According to Trulia.com, as of August 1^st, 23% of all the homes for sale in San Diego County had experienced a price reduction.    Back in July, only 20% of homes for sale had a price cut.  On average, list prices were reduced by 8%.  While it seem like negative news that San Diego home sellers had to reduce the list prices on their homes, San Diego did better than many other cities when it came to price cuts.  Out of the top 50 cities for the number of homes with price cuts, San Diego was 42^nd.  ZipRealty conducted a national survey in 26 major markets which found that over 45% of home listings had at least one price reduction.  

For the further information, check out this article from the San Diego Union Tribune.

On August 6, the Franchise Tax Board announced that they will cease accepting applications for the California Home Buyer Tax Credit at midnight on Sunday, August 15.  The Tax Board estimates they will be able to give the $100 million of tax credit to 14,500 – 20,000 people.  However, the Tax Board is accepting more applications than that to make sure they will be able to compensate for invalid or duplicate applications.  As of the 12th of August, the tax board had received 33,760 applications.  The tax credit is given out on a first come first serve basis, and once the $100 million is gone, any remaining applications will be denied.  
 
If you’re eligible for the tax credit, complete a FTB Form 3549-A application and fax it with the final settlement statement to the California Franchise Tax Board.  If your application is accepted, you will receive a certificate of allocation from the Franchise Tax Board, which you must have to claim your tax credit.  The tax board expects to send out these certificates over the next few months.
 
To see if you meet the criteria and for more information on how to apply, visit the California Franchise Tax Board website.

I’ve heard rumors about how Obama will be implementing a sales tax on all home sales as part of the new taxes written into the Healthcare Bill.  However, this is not exactly true.  While there is a tax that has the potential to affect real estate sales, there is no real estate “sales tax” or a real estate transfer tax in the bill.  This tax, commonly referred to as one of the “Medicare” taxes, is a 3.8% tax on “unearned income” for “High Income” tax payers.  This would apply to someone filing as “single” if their Adjusted Gross Income (AGI) is over $200,000.  For those who are married and filing a joint return, this tax would apply if their AGI was over $250,000. 

Here is how this tax would apply to a home sale.  For single filers, if the gain on a home sale is less than $250,000, that gain is excluded from the income tax and the 3.8% tax does not apply.  If the seller is filing a joint return, for gains less than $500,000, the 3.8% tax does not apply.  The only time a seller will have to pay the 3.8% tax is if he has a gain of more than $250,000 (for single filers) or $500,000 (for joint filers) AND if he has AGI above the $200,000 (single filer) or $250,000 (joint filer) AGI thresholds, as explained above.  The new Medicare tax on unearned income goes into effect January 1, 2013. 

For further information, check out these FAQs from the National Association of Realtors.

Last week, The Obama-administration approved plans to help five different states, California, Arizona, Florida, Michigan, and Nevada, who have been hit particularly hard by the housing bust.  These five states were selected because they have experienced a 20% or more decrease in home prices.  State agencies have individually worked on designing the plans, so they vary from state to state, but the plans are all aimed at: helping borrowers who have lost their jobs continue to make their mortgage payments; canceling second mortgages that are preventing struggling homeowners from receiving loan modifications; and helping homeowners pay overdue mortgage bills.  According to proposals from state housing finance agencies, California will be the largest recipient of the funding and will receive nearly $700 million, which will help an estimated 46,000 struggling homeowners. 

For more information, check out this article from the LA Times.

The California State Attorney General, Edmund G. Brown Jr., has joined the California Department of Real Estate (DRE) and the State Bar of California in warning California homeowners about the sharp increase in short sale fraud.  There are so many homeowners struggling to make their mortgage payments that a whole new industry of “short-sale negotiation" has been created.  While short sales can help underwater homeowners, they have also created an area for scammers to take advantage of people in financial distress.  Only three months ago, there were almost no complaints of short sale fraud filed with the DRE.  Now, over forty complaints are being investigated by that same department.  Before working with or paying a short sale negotiator, homeowners should be aware of the following red flags:  the individual holds no real estate license; the individual is charging upfront fees and/or surcharges; the individual plans on submitting a "straw buyer" offer to the short sale lender(s).  Note that any consumer can look up an individual's real estate license and its status on the DRE website.

Short sales can provide a way for struggling homeowners to avoid foreclosure and save their credit. Real Estate Commissioner Jeff Davi says, “Short sale fraud appears to be the fraud of the moment, and it is proliferating statewide.  Consumers, licensees and lenders must all arm themselves with the tools necessary to avoid such scams.”   (In an effort to better serve my clients and help them avoid these scams, I am a Certified Distressed Property Expert.)

For further information, check out this article, and check out these Tips On How To Avoid Being Scammed.

 I was recently asked, “If home prices are increasing, why are the houses in my price range nicer than they were a few months ago?”  The answer to this question comes down to the difference between sales price and list price.  When we talk about an increase in home prices, we’re talking about the sales price, which is what a buyer actually pays for a home.   A seller can select a list price for their home, but the price the home sells at will depend on what a willing and able buyer is willing to pay for it.   A seller may *think* her home is worth $400,000, but if the highest and best offers received are at $375,000 and multiple buyers just won't go any higher than that, then $375,000 is what that home is worth.  Of course, we always rely on a professional appraisal to confirm value while we are in escrow. 

If you are now seeing homes in your price range that seem nicer than they did a few months ago, it could simply reflect more realistic list prices on the part of sellers.  It could also be a coincidence that several homes in good condition came on the market at the same time.  In either case, consider yourself fortunate that there is good inventory to choose from and get in line to purchase!  With interest rates and prices this low, how could you not buy a home in one of the most desirable cities in the country?

Check out Truilia.com for graphs and statistics on both list prices and sales prices.

In my April 9^th blog, I talked about house flipping, how it is increasing in today's market, and what it is.  Some might think that house flipping is a trend that ended when the real estate bubble burst.  However, there are opportunities to make money during a real estate downturn by purchasing cheap homes, fixing them up, and then reselling them for a profit.  On June 9^th, the Financial Edge released an article naming the top three cities for house flipping.  San Diego came in first in front of San Francisco and Los Angeles.  They cited the Case-Schiller Index, saying that San Diego has seen 11 consecutive months of home price increases.  Even though home prices have been rising for almost a year, there are still opportunities to make a profit by taking advantage of the deals on foreclosure homes.  The Financial edge also cited RealtyTrac, saying that their data for April of this year shows that the areas in zip codes 92122 and 92104, which include neighborhoods like University City, La Jolla Colony, and the area northwest of the Zoo and Balboa Park (North Park), have foreclosure savings of up to 46%. 

If you’re interested in purchasing a foreclosure home, check out the Free Foreclosure Search on my home page and let me know how I can help!

For more information, check out this article

Today, the Senate approved a plan that will give homebuyers an extra three months to complete their transactions and qualify for the $8,000 federal tax credit.  This extension only applies to people who were under contract by the April 30 deadline.  Originally, homebuyers needed to complete their transactions by June 30, but many homebuyers were struggling to meet that deadline due to the extreme delays experienced with short sales.   Many buyers have been waiting patiently for months and months for banks to get around to issuing short sale approvals.  With this extension, an estimated 180,000 homebuyers who would have missed the deadline will now be able to take advantage of the tax credit.  These homebuyers now have until September 30, 2010 to complete their transactions.

For further information, check out this article from the Associated Press.