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Home Buyer Credit Gets New Life
By COREY BOLES and JOHN D. MCKINNON
WASHINGTON — Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.
The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.
The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.
Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.
The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.
While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn’t been finalized.
While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.
Write to Corey Boles at corey.boles@dowjones.com and John D. McKinnon at john.mckinnon@wsj.com
Thinking of listing your home for sale? Don’t be surprised if you’re in for a little “tough love.”
Though they may claim they’re in the minority within the industry, some real estate agents say they’re finding themselves talking increasingly bluntly to clients, advising them that it’s time — maybe way past time — to get real about pricing.
That is, they’re telling home sellers from the get-go, even at the risk of losing the listing, that “experimenting” with their dream price would be a waste of everybody’s time because the generally slow market just won’t bear it.
It’s an attitude that is recognizable in the form of Mike Aubrey, the North Potomac, Md., agent who each week tries to knock some pricing sobriety into sellers on HGTV’s “Real Estate Intervention.” Coming across as part real estate therapist, part hard-boiled cop, Aubrey walks the owners of languishing listings through just-sold comparable properties and active listings in an effort to convince them that they’re asking just too darned much.
“I don’t sugar-coat anything,” says Aubrey, an agent with RE/MAX Metropolitan Realty. “I don’t tell people what they want to hear. I tell them what they have to hear.”
Apparently, there’s room in the marketplace for that message, as recent polls suggest that agents and sellers continue to be on two different planets when it comes to pricing. (more…)
Quarterly median home prices plunge as first-time purchasers take advantage of tax credit
Bob Quick | The New Mexican
10/14/2009 – 10/15/09
For the first time in years, lower-priced homebuyers are driving the market in Santa Fe, pushing the median home sales price down an astonishing 32 percent in the city from a year ago.
The quarter saw about the same overall volume as a year ago because of an increase in county sales from 115 to 140. Total sales in the city, however, dropped 29 percent from 190 to 135, with the vast majority of the sales being buyers looking to take advantage of the $8,000 first-time homebuyer tax credit, said Mary Schroeder, president of the Santa Fe Association of Realtors.
Because of the new market — these buyers are looking for homes under $250,000 — there appears to be more affordable homes being built in the Santa Fe area, said Mary Schroeder, president of the Santa Fe Association of Realtors.
“We used to be in denial about the price of real estate in Santa Fe,” she said. “Now buyers and sellers are coming together … and we’re seeing a lot of sales in the lower end of the market. People are taking advantage of that tax credit.”
Schroeder spoke at a quarterly news conference of the Santa Fe Association of Realtors held to discuss sales results for the third quarter of 2009 and current trends in real estate in Santa Fe.
The association cautions that the median sales price is based on properties listed through the Multiple Listing Service, which does not necessarily include every sale in the area but historically has been used to track trends in the market. The median sales price means as many homes sold for more than that price as sold for less.
Total single-family detached-home sales in the city and county, combined from July 1 to Sept. 30, dropped from 305 in 2008 to 275 in 2009, while the median price dropped 8 percent in the county to $395,000. (more…)
At an annual Albuquerque festival, balloon pilots go head to head in aerial matchups of strategy and skilll. Stephanie Simon reports on the sport of competitive balllooning.
Incentives to Attract Buyers Shrink as New-Home Inventory Declines
By DAWN WOTAPKA
Home builders are scaling back on the incentives offered to attract buyers, putting an end to such freebies as sports cars and tropical vacations.
With new-home inventory falling as home sales in many markets pick up, builders say they no longer need to offer eye-popping inducements to move homes.
“I don’t know of any examples, at least in our system, where we’re offering the kind of huge incentives that were being offered two or three years ago,” said Brent Anderson, vice president of investor relations for Meritage Homes Corp., based in Scottsdale, Ariz.
In 2007, Meritage offered shoppers at its Valley Vista community in northern Phoenix $60,000 of incentives, including a free pool, gourmet kitchen or a reduction of the $349,000 ticket price, for a three-bedroom home with two-and-a-half baths. But the company is now building smaller, simpler houses that sell for about $245,000. Today’s buyers are more likely to get Meritage to pay their closing costs, worth about 6% of the closing price, or about $15,000 at Valley Vista.
Builders acknowledge that incentives are a part of doing business and they will never disappear completely. And the moves to cut back could be reversed if home sales stall again, which some housing analysts and economists are forecasting. These pessimists warn that new-home sales could slow when the $8,000 federal tax credit for qualified first-time buyers expires later this year or when a possible wave of foreclosed homes hits the market, which will compete with new homes for buyers.
For the time being, the pullback in construction and the reduction in inventory means more builders can sell homes without cutting as deeply into their profit margins. According to Jeffrey Laverty, an analyst with independent research firm Oscar Gruss & Son, single-family home supply whittled from 570,000 at the 2005 peak to 261,000 as of August. Supply, meanwhile, has fallen from 12.4 months in January to 7.3 in August, nearing the six-month mark considered a healthy balance between buyers and sellers.
During the housing boom, incentives weren’t really needed. Loose lending standards fed what seemed to be insatiable demand. With buyers willing to pay more, builders added square footage and tacked on profitable incentives, helping boost the gross margin to an average of 26.2% in 2005 — nearly double current rate, according to J.P. Morgan Chase analyst Susan Berliner.
During the housing bust, builders were stuck with a bloated supply of oversized and overpriced houses. They initially resisted price cuts, fearful of angering current owners who paid boom-time prices. Instead, builders moved to incentives that helped to mask pricing discounts.
The sector then resorted to slashing prices to move completed-but-unsold homes and get cash in the door. About two years ago, Hovnanian Enterprises Inc. offered the 72-hour “Deal of the Century,” shaving six figures off some home prices. In California, some neighborhoods from San Diego to Bakersfield — one of the markets hardest-hit by the downturn — carried incentives valued at as much as $100,000, plus other upgrades.
As the market deteriorated further at the end of 2008 and into early 2009, builders offered anywhere from 15% to 25% of the sales price in incentives, said Mollie Carmichael, senior vice president of John Burns Real Estate Consulting. Currently, the average ranges between 5% and 10% of the sales price depending on the area. And more often, incentives include offers of closing costs and reduced interest rates.
For example, luxury builder Toll Brothers Inc. earlier this year offered buyers a fixed rate of 3.99% on 30-year fixed-rate mortgage. Lennar Corp., one of the nation’s largest builders, went further with 3.625%. It is currently touting 3.99% on its Web site, a slightly higher rate, but one below the current average of 5.13% for a 30-year fixed loan below $417,000, according to mortgage-market analyst HSH Associates.
To offer lower mortgage rates, builders make upfront cash payments to mortgage companies, a process known as a “buy down.” On a $200,000 loan, it typically costs about $8,000 to buy down the mortgage rate by a full percentage point on a 30-year mortgage. Homeowners often make similar payments, known as points, to obtain a lower interest rate. For the builder, the buy-down is treated as a cost of sale.
But gone are the days when Lennar was offering vouchers for a Ford Mustang in some Florida communities, something it tried in 2006. Hovnanian, meanwhile, says its “Deal of the Century” won’t be repeated. The current “Pounce Before the Bounce” campaign urges buyers to act before the market recovers and prices climb, offering specials including lower mortgage rates and discounts on options and upgrades. Deals are now customized to move specific floor plans or lots, instead of a sweeping price reduction or promotion communitywide.
“The incentives certainly aren’t crazy,” said Laura VanVelthoven, Hovnanian’s corporate vice president of marketing and sales. “They’re incentives that make sense.”
The number of homes listed for sale declined in many U.S. cities in September, though supplies generally remain plentiful and future foreclosures cloud the outlook.
The supply of homes available for sale in 27 major metropolitan areas at the end of September was down 1.8% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates.
On a national basis over the past 25 years, inventories on average have declined 2.9% in September from August, according to Zelman & Associates, a research firm.
Compared with the year-earlier month, the September inventory in the 27 metro areas was down 27%.
The exact level of supply remains unclear because properties included on multiple listing services don’t include all of the foreclosed homes that banks are preparing to sell. Nor do they reflect what many analysts believe will be a huge supply of bank-owned homes likely to hit the market over the next few years. Amherst Securities Group recently estimated that total at seven million homes.
The Zip data don’t cover New York City. But Miller Samuel Inc., an appraisal firm there, reports there were 8,833 cooperative apartments and condominiums on the market in Manhattan at the end of September. That was down 5.5% from a year earlier. The supply in Manhattan had been on a rising trend since late 2007.
Paul Weideman | The New Mexican
10/4/2009 – 10/4/09
This condominium is unique at Quail Run. A wall between two penthouse units on the second floor of the main Clubhouse building was taken out to create a 2-bedroom, 2-bathroom, 2-kitchen condominum suite. “This unit is the poster child for Quail Run,” said Realtor Paul Stenberg, who is representing the 1,730-square-foot property with Patricia Love.
The new owner could alter the space, which is configured as a larger unit composed of living room, kitchen, dining room, bedroom, and bathroom; and a smaller, caregiver’s suite, both with access to a balcony shaded by mature aspen trees.
Taken as a whole, there are bedrooms at either end, one with a wood floor and fireplace. Most of the common spaces are carpeted, but the kitchens and bathrooms have floors of Saltillo tile. The main kitchen is outfitted with a Kenmore Elite refrigerator, GE range/oven and built-in microwave oven, a Kitchen Aid dishwasher, and countertops of ivory-colored tile. Behind a pair of doors, in a closet space, are the washer and dryer.
The smaller kitchen has Whirlpool appliances.
This penthouse unit is one of about 20 on the second floor of Quail Run’s Clubhouse. In the same building are a restaurant, a bar and lounge, a library, swimming pools, a billiards and poker room, and a spa/fitness facilities with certified personal trainers available. The 103-acre property holds tennis courts, a PGA-rated, 9-hole golf course (par 32), and nearly two miles of walking trails.
Sales at the Quail Run development opened in 1988. Today about 150 of the 265 units are held by full-time residents. The rest are available to rent as vacation homes at rates ranging from about $300 to about $700. Condominium owners pay dues of $350 to $1,200, depending on the size of the home, and this entitles them to the use of all facilities and covers the costs of security, snow shoveling, and hazard insurance. A portion of the annual dues is held in a $4 million reserve, from which funds are dispersed for common-area maintenance, such as for roof, stucco, and paving work.
Quail Run offers 500 nonresident memberships for the privilege of using the bar, the fitness center, and the golf course. These memberships cost $2,000 to $5,000 initially, with monthly dues of $125 to $240. The demographic in Quail Run is “mostly 50 and up,” general manager Marla Thompson. “We don’t have restrictions against children, but we don’t have very many. We have a handful of attorneys and several doctors, working professionals, and when their families come in to visit, they just rent units for them to stay in.”
Asked about impacts from the recession, Thompson said the project’s vacation rentals have slumped a bit this summer, but the club facilities and the restaurant “are doing well, and our real-estate prices have held their own. Our brokers published a chart showing price per square foot of condominiums in Santa Fe, and Quail Run hasn’t dropped very much compared to Santa Fe as a whole.”
The reasons are that Quail Run is “a stable community, and well-respected,” she said. “We have a lot of old-time Santa Feans who have decided to downsize and came here. Also, with our $4 million reserve account, we don’t have to do special assessments, so it helps with the surprise factor. We have 265 homes and that’s a lot of stucco and roofs; we do it in sections, so when we do it, those are sizeable contracts.
“Quail Run has been well-maintained over these 20 years and the landscaping has matured nicely, and it’s just a bunch of nice people here,” Thompson said.
The double-penthouse unit is listed by Paul Stenberg and Patricia Love, Barker Realty, for $895,000.
The key is to show bank you’re in its ‘modification sweet spot’
By Stephane Fitch
If your income slumped along with the economy, you’ve got plenty of company these days. So much so that the government has a program meant to help you out by cutting your mortgage payments to 31 percent of your gross income. But it turns out that qualifying for this benefit will probably take some fancy footwork, a sympathetic partner and a little luck. Here are some pointers for navigating the terrain.
Get to know the program
The program in question is the Obama administration’s $75 billion Making Home Affordable program.
It applies to mortgages held by Fannie Mae and Freddie Mac, the two giant mortgage holders that the government took control of a year ago. Under the government’s auspices, Fannie and Freddie are now cutting interest rates on mortgages they own to as little as 2 percent, with the aim of lowing payments to no more than 31 percent of a homeowner’s gross income.
If your income slumped along with the economy, you’ve got plenty of company these days. So much so that the government has a program meant to help you out by cutting your mortgage payments to 31 percent of your gross income. But it turns out that qualifying for this benefit will probably take some fancy footwork, a sympathetic partner and a little luck. Here are some pointers for navigating the terrain.
Get to know the program
The program in question is the Obama administration’s $75 billion Making Home Affordable program.
It applies to mortgages held by Fannie Mae and Freddie Mac, the two giant mortgage holders that the government took control of a year ago. Under the government’s auspices, Fannie and Freddie are now cutting interest rates on mortgages they own to as little as 2 percent, with the aim of lowing payments to no more than 31 percent of a homeowner’s gross income.
The key to receiving a modification seems to be convincing the bank that you’re in its modification “sweet spot.” That means you’re in dire enough financial straits to need help but not so deeply in trouble as to be hopeless. After all, the point of the program is to modify loans in a way that borrowers will be able to keep up.
Disqualifiers
What might disqualify you? Savings, for one thing. We spoke with nearly a dozen homeowners who applied for modifications. Several were turned down because of their hefty savings accounts.
On the other hand, if you have no savings and no job or income, you’ll likely be turned down for a modification too. The program requires that applicants show proof of current income and that the income is likely to continue for at least nine months. Since in most cases unemployment benefits are part of a six-month program, they’re unlikely to qualify you.
Other variables that can influence the odds of getting approved include your other debts (credit cards and car loans) and fixed costs. Once again, banks are looking for modifications that borrowers can live with. If you’re seeking to have your housing payment cut to 31 percent of your income but are spending another 60 percent on private school tuition and health club memberships, the bank is unlikely to be convinced that you’re a viable candidate.
Showing just enough distress
It isn’t pretty, but to go to the top of the list in your bank’s loan modification department, it might help to miss a mortgage payment or two. “It feels terrible to say it, but go delinquent,” says Ron Morgan, chief executive of Sterling Home Retention Services. Morgan’s firm specializes in home-loan workouts, and many banks are outsourcing their problem loans to firms like his.
If you need help with the application process, it’s probably available. The U.S. Department of Housing and Urban Development has a network of debt counselors, many available to work with you free of charge.
Tools on the Internet may also help you improve your chances at getting a modification. The owner of Homeowner’s Toolbox is a former California mortgage broker who says he has consulted with the banks he used to source loans for and has a sense of each bank’s modification “sweet spot.” Homeowner’s Toolbox is free to users and claims to estimate the probability that a homeowner will be approved for a modification.
The last thing you want to do is make your financial problems worse. That means avoiding any for-profit outfit that “promises” to get you a modification or that insists on a large payment upfront.
Played all the golf courses the Santa Fe area has to offer? Ever played the Codorniz de Diablo? Didn’t think so. Few have heard of the elusive “Quail Devil”. But for the seven Santa Fe pro’s who turned out last Monday for this “fiendish” 9-hole round, this was no Sunday school practice.
Even under the best conditions, Quail Run’s immaculately groomed fairways are narrow, with out-of-bounds lurking ever so close and glistening condominium windows just daring the swinger to slice.
The devil must have been at work in the wee hours Monday morning, as the players found the blue boxes as far back as possible in their respective tee boxes. In several cases, the fairway distance was increased by 20 – 30 yards. On the par three’s, pins were hidden behind copses of trees, invisible from the tee box.
And if there was a slope to be found on the manicured greens, the pin proudly stood at the severest of angles.
Hole #2 and Hole #8 particularly bedeviled the players: Hole #2’s pin was inches off the rear collar on a 15 degree backward slope. Hole #8’s length was increased to nearly 360 yards from the typical 340 and the pin placement was also adjacent to the rear collar sloping severely down and left; A close miss ended in a ball rolling unhindered 10 or more feet away.
Described as one of New Mexico’s most difficult holes period, Hole #7’s par 5 distance was increased to over 540 yards – the tee box offering the narrowest of windows through the trees to the fairway beyond. A beguiling hole on a typical day, most players over play this hole, refusing to lay up and tending to try for 150 – 175 yard green shots. Dense trees on the left and an arroyo on the right foul 80% of these tried and true players. On this day, two of our seven pro’s birdied this hole – both taking a calculated second swing to lie 100 yards out and wedging their ball to the green on their third. Arguably, two risky putts awarded the players with the lead – but this was only the 7th.
By the end of the ninth hole, four of our seven pro’s tied for a one-under par, or 31. When asked, the five visiting pro’s all commented that the course pleasantly surprised them on this day and that they would never underestimate the Quail’s prowess again.
Quail Run offers a great but often overlooked golf course and other amenities. Its located in Southeast Santa Fe and is a community worth exploring if golf is important to your lifestyle.
Thinking of listing your home for sale? Don’t be surprised if you’re in for a little “tough love.”
Home builders are scaling back on the incentives offered to attract buyers, putting an end to such freebies as sports cars and tropical vacations.
Paul Weideman | The New Mexican
