Sorry Readers: Homebuyer Credit Not Retroactive

Update: Just heard from White House spokeswoman Jen Psaki. The start date for the new $6,500 credit for existing homeowners will take effect as soon as Obama signs the bill into law tomorrow (Nov. 6). Sorry for the confusion. And thanks to “Dean” whose comment alerted me to my error. (In case you’re curious, this is the actual text of the bill. The credit extension was attached to a larger bill to extend unemployment benefits).

My last post was flooded with comments from readers asking whether the expanded credit will apply to them even though they closed on a home purchase earlier this year (or last year or the year before…). The answer: “No.”

It might seem unfair. But the new credit will take effect only after President Obama signs the measure into law tomorrow. Buyers will have until April 30 to sign purchase contracts and must close on the house by the end of June.

Under the new $10.8 billion plan, first-time buyers would continue to get $8,000 for buying a home. But existing homeowners will now be able to claim $6,500 credit for selling their current home and buying a new one, as long as they resided in the home they’re selling for at least five of the past eight years.

Income limits will also expand to $125,000 a year for individuals, and $225,000 a year for married couples. Sounds like a good deal right? Not judging from the flood of comments we’ve gotten from existing buyers who bought during the past several months. They feel gypped.

A commenter identifying himself as “Jim” said he bought a home during the Great Recession and was miffed that he didn’t get a tax credit because he wasn’t a first-time buyer. Now he’s angry.

“If they are handing out free money, give it to those who actually risked their capital,” he wrote a couple hours ago. “I am against this credit altogether … The government deciding who gets money and who doesn’t is TYRANNICAL.”

I sympathize with the comments. My parents only sold their Westchester County, N.Y. home of 30 years only a week ago and bought a much-less-expensive house one 15 miles away. They certainly would have qualified for the $6,500 credit and I’m afraid to break the news to them.

But the point of the credit is to stimulate home sales, not to hand out spending money (Though it will indeed stimulate some consumer spending). As I mentioned in my last post, it could be even less effective and efficient than the previous credit. If that’s the case, it’s best to put some limits on cost. Congressional analysts estimate that the six-month extension and expansion of the credit will cost taxpayers $10.8 billion. Can you imagine the price tag if it was made retroactive to the beginning of 2008?

View the original article here

[Give Credit Where It's Due] 4Q 2011 Manhattan Rental Report

Posted by Jonathan J. Miller -Thursday, January 12, 2012, 7:13 AM
1 Comment

We released our report on the Manhattan rental market for 4Q 2011 this morning. I’ve been authoring this series for Douglas Elliman since 1994.

The rental market tends to lead the purchase market because rentals are generally more immediately responsive to improvement in the economy. However since the economy’s growth is tepid the key driver has more to due with the tightness of credit.

Affordability may be at an all time high but many need an arm and a leg to get financing.

Here’s an excerpt from the report:

The median net effective rent (face rent less landlord concessions) jumped 9.5% to $3,121 from $2,950 in the same period last year. The year-over-year-gains were consistent across all rental price indicators as no apparent shift in apartment mix was responsible for the increases.

The data tables will be updated shortly, if not by the time you read this. The chart section on the new site remains a work in progress.

The Elliman Report: 4Q 2011 Manhattan Rentals [Prudential Douglas Elliman]
The Elliman Report: 4Q 2011 Manhattan Rentals [Miller Samuel]

View the original article here

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Credit Rules the Housing Market

Existing home sales were basically flat in April, down close to one percent month-to-month and down nearly 13 percent year-over-ear, but you have to remember last year we were heavily under the influence of the home buyer tax credit.

Now we are heavily under the influence of the mortgage market, or lack thereof.

It's all in the numbers.

Let's start with all-cash.

Thirty-one percent of buyers in April used all-cash, and that's down from 35 percent the previous month. It's likely because the number of investors buying in April also fell. Investors have been the only real fuel in this market, buying distressed properties at distressed prices.

Just look at the share of what's selling at what price point:

  The share of what's selling at what price point: % Change in Sales from 1 Year  Ago SOURCE: National Association of Realtors The low end is moving (your investors), and the high end is moving because higher-end folks don't always need a mortgage; neither investors nor high-end buyers were affected by the home buyer tax credit last year. The trouble is, the middle of the market makes up the lions share of home sales, over 60 percent, and it's not moving.

What's also juicing the lower end is the fact that the FHA raised insurance premiums on April 18th, so mortgage applications for FHA loans surged 20 percent in the four weeks before and then fell nearly 27 percent the week after. With that surge, you would have thought we'd see a lot more sales, but that wasn't the case.

Realtors are blaming appraisals.

In a survey of their people, 11 percent said they had to cancel a contract because of a low appraisal.

Appraisals, which during the housing boom were laughable, have now swung the opposite direction, towards levels so conservative that they themselves are actually pushing some asking prices lower. And that all goes back to the lenders, to Fannie Mae and to Freddie Mac. As house prices fall, lenders have to be even more careful because risk rises.

The remaining question, though, is why did investors fall out of the market in April, even just a bit? Is it because the homes on the market tend to be higher-priced? Inventories rose by 350,000 in April, which is usually the case in the heart of the spring season. The realtors claim there are fewer foreclosed properties to buy because banks are trying to do more short sales, which take longer. That may be as well. Short sales generally don't lower prices as much as bank-owned (REO) sales.

Whatever the answer, the fact is that we are not seeing any kind of spring surge. A tweet from a follower named "kentuckyloan": business has slowed to a crawl out here on the front lines.

Questions?  Comments?  document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick

View the original article here

Credit Suisse Monthly Survey of Real Estate Agents - Feb. 2011

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Who Qualifies for New Homebuyer Tax Credit?

Update: Just spoke with somebody at Sen. Chris Dodd’s office. According to the senator’s banking committee staff, you can qualify for the credit even if you signed a purchase contract before today’s date. The important thing is that you close on the home between today and June 30, 2010 (Your contract must be signed by April 30, 2010). Keep the questions coming, I’ll try to answer as many as I can.

Dozens of you have written in with good questions about the tax credit. I’m working on finding answers, especially to one recurring question. To qualify for the $6,500 credit is it necessary to sign the purchase contract after the measure is signed into law today or can a homeowner who closes on a home after today also meet the requirements? I’ve asked the White House to clarify.

In the meantime, I just received a press release from CMPS Institute, a training, examination, certification and ongoing membership program for financial professionals who provide mortgage and real estate equity advice.

It clarifies a few things. Read on.

More Homebuyers Qualify for Tax Credit

Ann Arbor, MI November 6, 2009 – Congress just passed an expanded version of the $8,000 first time home buyer tax credit that was set to expire on November 30. “The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. “Although the tax credit remains at $8,000 for home buyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for home buyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up home buyers did not qualify.” Consider these three examples:

Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.

The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. “If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010,” Nicholas said. “It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.”

The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. “This means that more people will qualify for the credit – especially in parts of the country with higher costs of living,” Nicholas said. “This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.”

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:
· The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others
· If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit.)
· The credit applies even if you have co-signers on your mortgage loan

View the original article here

Sorry Readers: Homebuyer Credit Not Retroactive

Update: Just heard from White House spokeswoman Jen Psaki. The start date for the new $6,500 credit for existing homeowners will take effect as soon as Obama signs the bill into law tomorrow (Nov. 6). Sorry for the confusion. And thanks to “Dean” whose comment alerted me to my error. (In case you’re curious, this is the actual text of the bill. The credit extension was attached to a larger bill to extend unemployment benefits).

My last post was flooded with comments from readers asking whether the expanded credit will apply to them even though they closed on a home purchase earlier this year (or last year or the year before…). The answer: “No.”

It might seem unfair. But the new credit will take effect only after President Obama signs the measure into law tomorrow. Buyers will have until April 30 to sign purchase contracts and must close on the house by the end of June.

Under the new $10.8 billion plan, first-time buyers would continue to get $8,000 for buying a home. But existing homeowners will now be able to claim $6,500 credit for selling their current home and buying a new one, as long as they resided in the home they’re selling for at least five of the past eight years.

Income limits will also expand to $125,000 a year for individuals, and $225,000 a year for married couples. Sounds like a good deal right? Not judging from the flood of comments we’ve gotten from existing buyers who bought during the past several months. They feel gypped.

A commenter identifying himself as “Jim” said he bought a home during the Great Recession and was miffed that he didn’t get a tax credit because he wasn’t a first-time buyer. Now he’s angry.

“If they are handing out free money, give it to those who actually risked their capital,” he wrote a couple hours ago. “I am against this credit altogether … The government deciding who gets money and who doesn’t is TYRANNICAL.”

I sympathize with the comments. My parents only sold their Westchester County, N.Y. home of 30 years only a week ago and bought a much-less-expensive house one 15 miles away. They certainly would have qualified for the $6,500 credit and I’m afraid to break the news to them.

But the point of the credit is to stimulate home sales, not to hand out spending money (Though it will indeed stimulate some consumer spending). As I mentioned in my last post, it could be even less effective and efficient than the previous credit. If that’s the case, it’s best to put some limits on cost. Congressional analysts estimate that the six-month extension and expansion of the credit will cost taxpayers $10.8 billion. Can you imagine the price tag if it was made retroactive to the beginning of 2008?

View the original article here

Credit Crunch Has Home Builders Sleepless in Seattle

Rubberball/Tyler Marshall | Getty Images

The only thing more cold and gloomy than my pre-dawn live shot here in Seattle this morning was the February housing report from the Department of Commerce.

Housing starts plunged 22.5 percent in February from the previous month, and building permits, which are an indicator of future activity, dropped 8.2 percent.

You can't blame it all on the weather either, as starts were even down 28 percent out West.

Some of the housing pundits this morning are saying this is all a good thing, as there is still far too much supply on the market, and builders need to sell all that before they start building more, but tell that to a home builder. The real issue now is credit. The big public builders can get some cash from the banks, but they represent barely a quarter of the market. The private builders are in real need now.

"Our view is that the housing market will start to get back on its feet this year," notes HIS Global Insight's Patrick Newport. "The forecast, however, hinges on builders being able to access credit. If builders cannot get financing to build new homes, housing will remain in the dumps."

Here in Seattle, California-based Shea Homes is going in a new direction for financing, tapping private equity, which appears to be far more willing to back private builders than the banks.

"What is new is hedge funds and private equity in this space. And the reason they’re in this space is because the market has become inefficient," says Shea Homes CEO Bert Selva.

Selva is teaming up with investor William Abbate, managing director at Angelo Gordon in Los Angeles, on land just outside Seattle, which they will develop into an active-adult community with over 300 homes.

"Our basis in these lots has been low enough so that we literally could build and sell homes today at today’s prices, and even, in some cases, we were projecting further price declines, and still have a healthy margins in our projections," says Abbate.

Back in the other Washington (DC), federal regulators are pushing hard to get banks to write down mortgage principal on troubled loans. This could soon be mandated as part of a combined state attorneys general settlement in the so-called "robo-signing" foreclosure paperwork scandal. If the big banks start to take even more losses on troubled loans, that will likely leave them with even less of an appetite to feed private builders.

Questions?  Comments?  document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick

View the original article here

[Post-Tax Credit] 4Q 2010 Brooklyn Market Overview Available For Download

[click to open report]

The 4Q 2010 Brooklyn Market Overview that I author for Prudential Douglas Elliman was released today.

Other reports we prepare can be found here.

The 4Q 2010 data and a series of charts are updated with the 4Q 2010 data.

Press coverage can be found here.

Since the neighborhood data is too thin to build a reliable trend line, we have grouped neighborhoods by logical regions based on housing stock.

An excerpt

…There were 1,468 sales in the fourth quarter, 29.9% below 2,093 sales in the prior year quarter and 21.9% below 1,879 in the prior quarter. While the decline in number of sales from the prior quarter is a seasonal pattern, the decline is greater than the 8.9% average of the prior five years. A significant portion of the decline in number of sales is attributable to the expiration of the federal homebuyer tax credit, which incentivized more sales activity in the first half of 2010, coming at the expense of less sales activity in the second half of 2010. Listing inventory rose 14% to 6,203 in the fourth quarter, from 5,439 in the prior year quarter and 6.4% below 6,630 in the prior quarter. The drop in sales caused inventory to rise and the monthly absorption rate—the number of months to sell all active inventory at the current pace of sales—to edge higher. The absorption rate was 12.7 months in the fourth quarter, weaker than 7.8 months in the prior year quarter, but below the first quarter 2009 rate of 15.3 months, immediately following the onset of the credit crunch at the end of 2008…

4Q 2010 Brooklyn Market Overview [Miller Samuel]
Brooklyn housing market chart gallery [Miller Samuel]
Brooklyn custom data tables [Miller Samuel]
4Q 2010 Brooklyn Market Overview Podcast [The Housing Helix]

View the original article here

How To Profit From The Credit Crisis

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Q & A on New Home Buyer Tax Credit

The National Association of Realtors Web site has a nice Question & Answer section about the new credit

The Realtors’ spokesman tells me that the new credit will start tomorrow, not today.

“We rechecked the effective date for the repeat buyer,” spokesman Walt Malony said in an e-mail. “The effective date is ‘after the date of enactment.’Today is date of enactment, so the fun begins tomorrow, Nov. 7.”

Judging from all of your questions, tomorrow is going to be a confusing day for buyers, sellers, and the real estate agents, brokers, and attorneys advising them.

View the original article here

Who Qualifies for New Homebuyer Tax Credit?

Update: Just spoke with somebody at Sen. Chris Dodd’s office. According to the senator’s banking committee staff, you can qualify for the credit even if you signed a purchase contract before today’s date. The important thing is that you close on the home between today and June 30, 2010 (Your contract must be signed by April 30, 2010). Keep the questions coming, I’ll try to answer as many as I can.

Dozens of you have written in with good questions about the tax credit. I’m working on finding answers, especially to one recurring question. To qualify for the $6,500 credit is it necessary to sign the purchase contract after the measure is signed into law today or can a homeowner who closes on a home after today also meet the requirements? I’ve asked the White House to clarify.

In the meantime, I just received a press release from CMPS Institute, a training, examination, certification and ongoing membership program for financial professionals who provide mortgage and real estate equity advice.

It clarifies a few things. Read on.

More Homebuyers Qualify for Tax Credit

Ann Arbor, MI November 6, 2009 – Congress just passed an expanded version of the $8,000 first time home buyer tax credit that was set to expire on November 30. “The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. “Although the tax credit remains at $8,000 for home buyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for home buyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up home buyers did not qualify.” Consider these three examples:

Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.

The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. “If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010,” Nicholas said. “It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.”

The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. “This means that more people will qualify for the credit – especially in parts of the country with higher costs of living,” Nicholas said. “This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.”

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:
· The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others
· If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit.)
· The credit applies even if you have co-signers on your mortgage loan

View the original article here

Latest Homebuyer Tax Credit: Pay More, Get Less

President Obama could sign the $10.8 billion homebuyer tax credit extension and expansion plan into law as soon as next week. The Senate this evening voted 98-0 in favor of the extension. The House is expected to approve it within days.

But a new report from Goldman Sachs suggests that the six-month extension might do little for the fragile housing market and could be even less effective than the soon-to-expire credit for first-time buyers that cost taxpayers about $8.5 billion and lasted nearly a year.

The Congressional proposal would give buyers until April 30, 2010 to sign purchase contracts and another 60 days to close. And it will no longer be just for first-time buyers. Homeowners who have lived in their current home for five of the last eight years can claim $6,500, under the new law, which would only apply to houses purchased after the current tax credit expires Nov. 30. Income limits will be more generous: $125,000 a year for individuals, $225,000 a year for married couples.

But Goldman Sachs economist Alec Phillips says, in a report released to clients Nov. 3, that the expanded program won’t raise home prices and sales much and likely won’t significantly trim the supply of unsold homes.

“The extension of the current credit will probably result in some incremental first-time buying but not as much as the last one,” Phillips said in a phone interview today. “The expansion to the other population of buyers [existing homeowners] will provide a small boost to prices, but no more than 1%.”

According to Phillips’ calculations, all but about 200,000 of the 1.4 million first-time buyers who claimed the credit this year would have purchased a home even without the incentive. And the credit resulted in boosting home prices only by about 1%(Phillips assumed in his calculation that home prices rose in part because sellers built a large portion of the credit into their asking prices).

The pool of first-time buyers who still need an incentive to get off the fence is likely small because many of them have already taken advantage of the now-expiring credit. Existing homeowners who qualify for the new $6,500 credit could spur additional sales. But the supply of unsold homes will remain unchanged because most homeowners will have to sell their existing home in order to buy a new one (The credit only applies to principal residences).

This doesn’t mean that the credit is useless, only that it is inefficient. For one thing, it could stimulate the economy by giving consumers more money to spend. (Economist Simon Johnson argued in the Washington Post last week that the tax credit is both inefficent as a homebuyer incentive and as a economic stimulus).

“We were not arguing that [the expanded credit] would have no effect,” Phillips said. “Just will the effect be as great as last one?”

View the original article here