Gifts for downpayment...

Notice to givers of down payments...  please read on:

Home buyers trying to scrape together enough money to cover the typical 20 percent down payment frequently look to relatives for help. About 1/4 of first-time home buyers were looking for some help from the family for their downpayment (typically 20% of the purchase price). But mortgage lenders closely scrutinize cash gifts, and the check may not count toward a home purchase if the borrower can’t thoroughly document its source and intention.

There are some rules to know and to follow, and it is easy to understand once you think as a bank: if one takes too much of a loan, the risk of not being able to pay it back increases.  So the help with the downpayment cannot be another loan, in one form or another.

This article from the New York Times (by Lisa Prevost, published: December 27, 2012) is most interesting and also gives some pointers as to some of the tax implications.

As always, I advise my clients to talk to the specialist: the lender, and to do so ahead of time because it may take time to structure the transaction properly.  The first stop in buying a property is really and truly the lender, in my opinion.

Thanks for reading,

Francis Rolland

Silicon Valley Real Estate

Smart stats

But, where did the old bridge loans go??

I am surprised that no one talks about it, but:  where did all the bridge loans go?

It used to be that when you wanted to move up, or move down, you could buy a property first, and then sell your current home.  You insured in the process that you would not be out of a place to live and you would only move once.

To achieve that, you would get a bridge loan. 

Banks used to lend you money, based on your qualifications of course, but also based on the fact that the old house would be sold immediately.  They required to see that the house was listed with a Realtor, and if the market was not awful, it made a lot of sense: the house would eventually sell, and the old loan would be paid back.  The banks did not take any risk doing so (the profile of customers doing this is not particularly risky when you think about it).

The fact that the market went seriously South is certainly a good enough reason to stop doing bridge loans.  But, haven't the banks heard yet that in the certain areas, it is a strong sellers' market?  You would think that they would have acknowledged that by now, in particular in the Bay Area.  And the Bay Area is by no means the only area with a sellers' market.

Among the many factors that would help the recovery of the real estate market nationwide, and the economy as a whole, this is a major one.  My experience is that a good 10 to 20% additional properties would be on the market if banks made bridge loans. Right now the way things are goes like this: sellers have to sell their house first, then buy the replacement home with the proceeds of the sale.  But since they are not sure at all that they will be able to buy because of the excessively competitive environment, they do not risk the move.

A bridge loan is the solution.  By freeing a lot of housing inventory, it would enable more people to buy homes (one just has to look at open houses in the Bay Area since the beginning of 2012 to see the demand), more loans would be made, and the market would go up - in a more orderly fashion than now.  The banks would certainly win: they are in the business of making loans, good loans.  And in these situations, there are two loans to be made, instead of just one.

So, what are they waiting for? 
Does your personal experience fit in this scenario? Let me know...

Thanks for reading,

Francis

Silicon Valley real estate
Local market: Smart graphs

Nearly 21 million U.S. homeowners are mortgage free

With all of the problems associated with real estate, and for new homebuyers the difficulty of getting a loan, one wonders: how difficult is it to own a place in the US.  Well, taking a step back, and seeing the big picture is always a bit surprising and informative, as evidenced by the article below.

Almost 21 million Americans, or 29.3 percent of homeowners, own their homes outright, unencumbered by a mortgage, according to a recent Zillow analysis of mortgage data.

Analyzing data through the third quarter of 2012, Zillow found that 20.6 million homeowners nationwide own their homes free and clear of mortgage debt.

Among the nation's 30 largest metro areas included in the study, Pittsburgh, Tampa, Fla.; New York, Cleveland, and Miami had the highest percentage of free-and-clear homeowners. Washington, D.C., Atlanta, Las Vegas, Nev.; Denver, and Charlotte, N.C. had the lowest percentage.

It is good to keep things in perspective.

Thanks for reading!

Francis

Silicon Valley real estate

Stats, smart graphs etc...

Current Mortgage rates

New laws (as in: fiscal cliff) & real estate...

President Obama signed the American Taxpayers Relief Act into law last Wednesday (1/9/13).

Here are some housing-related provisions included in the federal law:

- The restoration of a tax deduction for mortgage-insurance premiums, including premiums paid to the Federal Housing Administration and private mortgage insurers. This provision expired at the end of 2011 but has now been retroactively extended for all of 2012 as well as 2013.

- 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

- Capital gains rates will remain at 15 percent for those earning less than $400,000 (individual) and $450,000 (joint). Gains above those income levels will be taxed at 20 percent. Gains on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 taxpayers filing jointly.

- The “Pease Limitations” that reduced the value of itemized deductions, including the mortgage interest deduction, are permanently repealed for most taxpayers but will be reinstituted for high income filers. This provision reduces a taxpayer's itemized deductions by 3 percent of the amount of his or her adjusted gross income (AGI) that exceeds the threshold amount. Under the new law, the Pease thresholds are $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers (i.e., a married couple with an AGI of $400,000 would be $100,000 over the threshold; the couple’s deductions would be reduced by $3,000 which is 3% of $100,000). No matter how high a taxpayer's AGI, the Pease reduction cannot exceed 20 percent of the amount of itemized deductions otherwise allowable for the year.


The bill includes a provision to extend the Mortgage Forgiveness Debt Relief Act, which will for one more year exempt the taxation of mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification (including any principal reduction). While debt relief has been extended at the federal level, the California exemption expired at the end of 2012, so forgiven mortgage debt is considered taxable state income for now.

This information is just in from our California Association of Realtors.  Of course, as always with tax questions, you are advised to check with your tax accountant how the new laws apply to you, and affect you in your particular situation.

Thanks for reading,
Francis

Silicon Valley real estate
Stats, smart graphs etc...

Current Mortgage rates

Fewer first-time homebuyers.

Is it a sign of the times?  Real estate fares much better today than last year, but a new trend emerges:
first-time buyers are fewer...

A survey by the NATIONAL ASSOCIATION OF REALTORS® found that only 31 percent of their sales were to first-time buyers. Normally, first-time buyers represent closer to 40 percent of the market.
More details about this (sad) trend on this article of the New York Times.

Thanks for reading!
Francis

Silicon Valley real estate
Smart graphs...

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Home prices nationwide rise.

Home prices nationwide rise for eighth consecutive month.

CoreLogic’s October CoreLogic HPI report shows home prices nationwide, including distressed sales, increased on a year-over-year basis by 6.3 percent in October 2012 compared with October 2011, representing the biggest increase since June 2006 and the eighth consecutive increase in home prices nationally on a year-over-year basis.

Highlights as of October 2012:

• Including distressed sales, the five states with the highest home price appreciation were: Arizona, 21.3 percent; Hawaii, 13.2 percent; Idaho, 12.4 percent; Nevada, 12.4 percent; and North Dakota, 10.4 percent.
• Including distressed sales, the five states with the greatest home price depreciation were: Illinois, -2.7 percent; Delaware, -2.7 percent; Rhode Island, -0.6 percent; New Jersey, 0.6 percent; and Alabama, -0.3 percent.
• The five states with the largest peak-to-current declines, including distressed transactions, were Nevada, -53.5 percent; Florida, -44.5 percent; Arizona, -40.2 percent; California, -36.6 percent; and Michigan, -35.3 percent.

Corelogic Home price index.   (The CoreLogic HPI incorporates more than 30 years’ worth of repeat sales transactions, representing more than 65 million observations...)

Thank you for reading,

Francis

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Random acts of flowers.

Previews Luxury Market Report

The 2012 edition of the Previews Luxury Market report has been released! As 2012 comes to a close, Coldwell Banker Previews International® has taken a look back on the affluent marketplace for the December 2012 Luxury Market Report. Inside the report, you’ll find:

• Ultra-Affluent Market Survey. What motivates a buyer or seller at the very top of the market? We surveyed Previews® NRT agents who have either listed or sold a property priced at $10 million and above in the last three years to give you new insight into this rare consumer.

• Women of Affluence. Did you know that women control $20 trillion in consumer spending worldwide and women’s global incomes have been estimated to grow by $5 trillion in only a five-year span? Previews explores the reasons why affluent women have become one of the most influential groups in the luxury marketplace today, and how they’re rapidly changing the business of real estate.

• Top 10 U.S. ZIP Codes. This year, the ZIP code charts reveal a few new hotbeds for affluent buyers, such as Manhattan Beach, Calif. and Saratoga, Calif., in addition to the blue-chip luxury neighborhoods of Beverly Hills and Greenwich, Connecticut.

We hope this information will give you a more nuanced picture of the global luxury marketplace as we move into 2013. Click here to download the full report.

Thank you for reading,

Francis Rolland

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.

Homeowners' tax deduction in danger?

... Reading the other day the headlines in the San Jose Mercury News: "Coveted tax break in peril?"

With the negotiations going on in Washington to avert the "fiscal cliff", we all know that there will be some combination of cost reduction measures and tax increase, whatever this combination will be.  But the tax deduction for homeowners regarding the interest paid on their loan is definitely in consideration.

For the main parts of the nation, this is not an issue, but for the Bay area, where according to this article, 40% of the purchase loans in the Counties of Santa Clara and San Mateo are for more than $500,000, it is a big deal.  13% of those loans were for more than $800,000, and 10% were for more than $900,000.

One way to find money is to reduce this interest deduction.  If the maximum mortgage cap is brought down from the present $1million to $500,000, over 10 years, it would raise $41.4 billion according to this article, which would look good to reduce the deficit of course. 

What would you do, if in the course of reducing the deficit, the politicians were to take away part of the mortgage deduction?  Most likely, if you own a house in the Bay Area, you have a significant mortgage attached to that house.  Would it affect you?  Would you agree with that?

Francis

Silicon Valley real estate

Current Mortgage rates

Non-profit organization worth noting: Partners for New Generations.