INCREASING RENTS MAKE OWNING MORE ATTRACTIVE
INCREASING RENTS MAKE OWNING MORE ATTRACTIVE
It is no secret that rents are increasing everywhere. According to REIS Inc., a real estate research firm, rents nationally increased 2.7% last year and the vacancy rate dropped below 5 percent for the first time since 2001.
I the San Francisco Bay Area the increase was steeper. San Francisco saw increased of 5.9% and San Jose has a 4.9% rise. Data for the Sacramento Area was not available at the time.
Historically, the cost to rent has been about ten percent of the after-tax cost of owning a home. That started to change in 2010, as the price of housing declined. By the end of 2011, a Deutsche Bank analyst found that the cost to rent an apartment was 15 percent higher and the cost to own a home.
Indications are that investors, buying reasonable priced homes and converting them into rentals, caused much of the recent home buying activity. Tenant complaints about rising rents are increasing as property owners’ increase their return on investment.
Of course, it is not always easy for renters to qualify for the financing needed to complete a home purchase. Loans for 100% of the purchase price are all but gone, with the notable exception of loans for rural housing and VA loans. However, borrowers do have to have enough cash put aside to make the down payment and to cover closing costs. FHA loans still only require a down payment of 3.5% of the purchase price.
Borrowers also have to have demonstrated job stability and good credit records to enter the home purchase arena.
Nonetheless, if these trends continue, more renters will be motivated to become homeowners. That motivation will overshadow the concern that the housing market will take another dip.
Select this link for the Wall Street Journal article on this subject:
Feel free to contact us if you have questions about financing a home purchase, or if you would like to look at homes in the greater Sacramento area. (916) 337-0658 or e-mail Mike@BuyYourVilla.com
EL DORADO HILLS, CA HOME SALES DATA – FEB 2012
EL DORADO HILLS, CA HOME SALES DATA – FEB 2012
The purpose of this post is to provide those interested in the El Dorado Hills, CA housing market data about that market. This report covers February 2012, and the fourteen previous months.
The first chart lists the cost-per-square-foot for all homes sold in El Dorado Hills by month. Although there is a slight fluctuation from month to month, the viewer can see that there is no downward trend. When we look at year-over-year prices, December of 2010, was three dollars lower than the December 2011 number, January of 2012 was three dollars lower than January 2011 and February 2012 was three dollars higher than the previous February. We submit that the market is bumping along at the much-touted “bottom.” Those potential buyers who decided to remain on the fence, “until prices hit bottom” no longer have a reason to wait.
The second chart shows the level of inventory, (the number of homes for sale divided by the number of homes sold each month). Pundits tell us that a six-month inventory is a neutral market.
Therefore, we can see that the El Dorado Hills market is, and has been for some time, a seller’s market. We had a buyer’s market in January and February of 2011, but the current inventory is less than half what it was last year. In fact, we have been bumping along in the three to four month range for the past year.
Those who listen to the media should remember that disaster sells soap, so media reporting, by necessity, emphasizes the negative aspects of the market. Although there are segments of the housing market that are in trouble, El Dorado Hills is NOT one of them.
Over a year ago, we posted an article warning about the pending housing shortage. We continue to stand behind that prediction. All you have to do is ask those actively looking for a home.
It is going to get worse. The demand will result in price increases and with those increases; more homeowners will put their homes on the market. Unfortunately, without any new home construction in the past five years or more, we will still be short of inventory.
If you would like to see this data for other cities and towns in our area, feel free to contact us at (916)337-0658 or e-mail Mike@BuyYourVilla.com.
To use the very best Internet property search tool go to www.BuyYourVilla.com.
MORTGAGE RATES ARE MOVING BACK UP
MORTGAGE RATES ARE MOVING BACK UP
Have you waited too long? 
We have been advising potential buyers for months that housing prices and interest rates are so low that it is time to take the plunge. The present housing market is one that we are not likely to see again in our lifetime. Some have decided to follow our advice while others have not.
Some tell themselves that they are waiting for the bottom of the market. The problem is that the only way to know when we hit the bottom is when we look back at the data for several months so that we can identify when it happened. Hindsight is always 20/20.
We cracked our crystal, so we are not very good at predicting the future. What we can tell you is that mortgage interest rates are on the way up. The average rate for a 30-year fixed-rate mortgage is back above 4% now and the pundits tell us that they are destined to keep going up through 2012 and 2013.
You may not be aware of the fact that a few decades ago people were paying as much as 17%! The low 4% range is still EXCELLENT.
Fortunately, rates are not skyrocketing, so there is still time to act. Of course, the longer you wait the higher rates are going to be.
The current market conditions are also ideal for those with sufficient equity to refinance and lower their monthly mortgage payments. The key factor is the amount of equity an owner has in their property. Anyone with a 25% equity interest in his or her home that is paying 6% or above is just GIVING money to their lien holder. How do you like making investors richer?
Granted, lenders are more particular about whom they loan money to in our current market. The days of the fast and furious lending spree with “Liars Loans” and negative amortization loans have gone the way of the Klondike Gold Rush. However, the award goes to the persistent. They will look back on these good old days, when you could get a mortgage loan for 4%!
Select this link for a recent Wall Street Journal article on this subject:
THIS IS THE BOTTOM OF THE HOUSING MARKET
THIS IS THE BOTTOM OF THE HOUSING MARKET
After years of uncertainty and continued declines in home values, we have arrived! This IS THE BOTTOM OF THE HOUSING MARKET!
Forget what the talking heads are saying on television. Look at the financial press. Story, after story is being published that confirms that we are at the bottom. There will not be another opportunity like this in our lifetime.
During a recent CNBC interview with Donald Trump, he said, “When people come up to me and say, ‘What should I do, Mr. Trump?’ “I say go buy a house.”
Warren Buffet declared that if he had a way to manage them, he would buy a couple of hundred thousand single-family homes and rent them out. Even the famously conservative Robert Shiller, known for the Shiller Report, said that, “it wouldn’t be an obvious mistake to buy a house now.”
Bank of America/Merrill Lynch forecast that housing prices would fall 3.5% in 2012. They just revised that forecast made in November and they now think that prices will increase .5%!
Other current stories advise that in 98 out of the top 100 housing markets in the country, it is cheaper to buy than it is to rent. San Francisco and Hawaii were the notable exceptions.
Make no mistake, no one is saying that home prices are going to increase ten or twenty percent in the next hear. The recovery will be slow. However, predictions are that home prices will have recovered 42% by 2020. So, homeowners will be able to take advantage of home value appreciation once again.
Granted, it is more difficult to qualify for a mortgage in 2012. Lenders are much more cautious than they were in the years of the housing boom. Fortunately, there are indications that they are starting to loosen their guidelines so that more people may qualify. After all, they are in the business of lending money and if they hold too tightly on the reigns, they won’t have any business.
The prudent homebuyer should be paying down their existing debt and putting a little cash away for a down payment in an effort to run the gauntlet of loan qualification.
Ten years from now, those who bought in 2012, will be looking back and congratulating themselves on the smart move they made, buying at the bottom of the market. Will you be one of them?
Here is a link to the U.S.A. Today article about home prices:
Here is a link to the Wall Street Journal article by Alexandra Scaggs:
If you are thinking of taking advantage of this housing market, and wish to get professional assistance, contact us at (916) 337-0658 or e-mail Mike West at Mike@BuyYourVilla.com.
TAX IMPLICATIONS OF A SHORT SALE
TAX IMPLICATIONS OF A SHORT SALE
We recently wrote a post about the new revisions to the HAFA (Home Affordable Foreclosure Alternative) program. The government is getting serious about helping distressed homeowners avoid foreclosure.
When the Treasury department first announced HAFA several years ago, the intent was to help homeowners avoid foreclosure and get the housing market back on track. Unfortunately, several of the original guidelines were too restrictive and not many homeowners were able to qualify. Despite that fact, as lenders became more familiar with the program, more and more homeowners have been able to qualify.
The revised guidelines, designed to increase the number of homeowners that can qualify, are expect them to have that result. This is all good news for homeowners who will be able to keep the foreclosure blight off their credit record. You can review the changes by going to that post from March 16, 2012, by selecting this link: http://www.BuyYourVilla.com/blog .
It is now apparent that more distressed homeowners are going to be able to avoid foreclosure. Although there are several ways to do so, a short sale is the most common solution.
Once the homeowner learns that there is a viable solution, and starts down that path, one of the things that will occur to them is that there may be tax implications, which could result in a nasty tax liability.
Tax code recognizes forgiven debt as taxable income. So, if a homeowner gets the approval to sell their home for $ 100,000 less than they owe that bank, the bank issues a 1099 and the homeowner has to pay income taxes on that forgiven debt. One would suspect that amount, not uncommon in a short sale, would put the homeowner in a slightly higher tax bracket.
Fortunately, for those who act quickly, that may not be a problem. Once again, the government came to the rescue. In 2007, they passed a law that excludes forgiven mortgage debt from the taxes. However, we have to warn you that the tax relief expires on December 31, 2012.
It is possible that the relief may be extended beyond that date, but given the state of our economy, we don’t advise betting on that happening.
So, to make a long story short, if you know someone who is having trouble making their mortgage dept (remember that they do NOT have to be behind with their monthly payments to qualify) have them contact an experienced distressed property expert. Short sales take time and time flies when there is a deadline like this coming at you.
For more information about mortgage debt forgiveness and the associated tax implications, select this link to an excellent RISMedia article.
http://wwwrismedia.com/2012/03/11/what-you-need-to-know-about-cancellation-of-mortgage-debt
If you know anyone who needs professional help, at no charge, in the Greater Sacramento area, have him or her contact us at (916) 337-0658 or e-mail Mike@BuyYourVilla.com
