Portland - Not So Good With Snow

It has been a very interesting 18 or so hours in Portland.  Starting about 3pm yesterday the large wet snowflakes started coming down.  As a native Oregonian, I realize how rare snow fall is at the floor of the Willamette Valley, where Portland sits.  So, when when the snow starts to fall I, like a lot of Portlanders, feel a rush of childhood enthusiasm.  Just seeing the snow adds to the feel of the holiday season.

This blog has been moved to: http://www.aarons2cents.com

Impact of Loan Modifications on Credit

I have been asked quite a few times over the last couple of years how short sales and modifications affect credit. First off, both almost always affect it negatively. However, there are a lot of factors that come in to play. This is a pretty good article explaining how a simple loan modification can hurt your credit:

Mortgage rescue: Credit score killer

By Tami Luhby, senior writer 
December 28, 2009: 8:37 AM ET

NEW YORK (CNNMoney.com) -- Most troubled homeowners view President Obama's foreclosure rescue plan as a way out of their financial troubles.

But many don't realize that entering a trial mortgage modification can actually hurt their credit.

CNNMoney recently received a flood of e-mails from readers complaining about the impact of trial modifications on their credit reports.

To be sure, many people who apply for the president's plan are already delinquent in their mortgage payments, which wrecks their credit backgrounds. And obtaining a trial modification should affect borrowers' scores because it shows they cannot meet their original obligation, experts said.

But being in a months-long trial period may only add to the pain.

Jason Axelrod learned that the hard way.

Axelrod, a municipal employee who lives outside Chicago, entered a trial mortgage modification program this spring.

He had not fallen behind in his mortgage, but he was finding it harder to make ends meet after his overtime was cut and his property taxes skyrocketed. Told it would not hurt his coveted 750 score, Axelrod secured a $565 reduction in his monthly payments.

Eight months later, Axelrod is still stuck in the trial modification, trying to satisfy his loan servicer's endless requests for documents.

And to his horror, his credit score has plummeted to 644.

"It's completely destroyed my credit," said Axelrod. "If I had known it would affect my score, I would have never entered the program."

Representatives at JPMorgan Chase (JPM, Fortune 500), which services Axelrod's loan, are instructed to tell applicants that entering a modification could impact their credit histories, a bank spokeswoman said.

Despite his weakened credit score, there is at least some good news for Axelrod: After being contacted by CNNMoney.com, JPMorgan Chase said his permanent modification had been approved.

Credit reporting guidelines

Under the president's plan, troubled borrowers can have their monthly mortgage payments reduced to 31% of their pre-tax income.

Homeowners are first put in a trial modification for several months to prove they can handle the new commitment and to give the bank time to collect the necessary income and hardship verification documents.

During this period, industry guidelines call for loan servicing companies to report borrowers to the credit bureaus according to their status before they entered the modification - either current or the number of days delinquent.

However, borrowers' accounts are also designated with a code indicating they are in a partial payment plan.

The coding alone can impact credit scores, which measure a consumer's financial health and range from 300 to 850 under the FICO system. The severity depends on how many payments the borrower missed before entering the program. Those who were current in their mortgages could see their scores fall up to 100 points, according to the Treasury Department.

Just what banks are reporting to the credit bureaus remains a matter of some debate. Some servicers have been inconsistent in following the guidelines, according to a Treasury official. Also, they don't always report that their current borrowers have entered modification plans.

Some 24,000 trial modifications were given to those still current with their payments, as of early September. A total of 366,000 trial modifications were in effect at that time. The total number has since risen to just under 700,000, as of the end of November.

JPMorgan Chase, Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500), which are among the nation's largest servicers, declined to be interviewed for this article. A Bank of America (BAC, Fortune 500) spokeswoman said the bank follows industry guidelines.

According to the Mortgage Bankers Association, an industry group, servicers are required to report all information about their clients, including whether they are in modification plans. For seriously delinquent borrowers, this may improve their status somewhat since they will start making payments again.

"If you are in the trial period, over that three month period, you are going to improve your situation in most cases," said Vicki Vidal, the group's associate vice president for government affairs.

Once borrowers receive a permanent modification, their payment status is listed as current. However, the delinquency remains on their credit reports for up to seven years.

On top of that, the longer homeowners are listed as delinquent, the greater the impact on their credit score. That's one reason why servicers should be quicker to convert borrowers from trial modifications to permanent adjustments, said Jan Jones, a housing counselor in Alaska.

Financial institutions have come under fire in recent weeks for dragging their feet in evaluating borrowers for permanent adjustments.

"What's making people upset is the length of time lenders are taking to consider these workout plans," said Jones, who works for Consumer Credit Counseling Service of Alaska.

Axelrod is already feeling the impact of his lower credit score. He ordered a new car this summer, believing it would come with a lower monthly payment. It arrived in mid-December.

But because of his newly blemished credit background, his two credit unions turned him down for a car loan. His dealership told him the best he could get is a 12% rate, a hefty hike from the 4.7% he was paying before."This is the biggest nightmare," he said. "My credit is completely useless."

November Home Sales Leap

In looking at my business over the last couple of months, I would say this is characteristic of the local market as well as the national market.  I do think the tax credit contributed to inflate these numbers but still I think perception changed.  The clients I have worked with lately realize that things can't continue to drop the way they have.  There are some amazing deals out there right now, and financing is still really cheap.  With the new incentives to sell existing homes, it's tough to lose.  With that said, here is a great article from CNNMoney.com

November home sales leap

By Les Christie, staff writer December 22, 2009: 12:40 PM ET


NEW YORK (CNNMoney.com) -- After surging 10% in October, sales of existing homes jumped again in November, growing 7.4% compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors.

"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit," said NAR's chief economist, Lawrence Yun.

November was originally going to be the last month in which sales to first-time homebuyers would qualify for a federal tax credit of up to $8,000. However, that deadline was extended through June.

In addition, the tax credit was expanded to cover people who already own a home. They can qualify for a $6,500 tax credit if purchase a new house before the end of June. That should encourage "trade-up" buyers.

The strength of sales in November surprised the industry. A panel of experts compiled by Briefing.com had forecast month-over-month sales growth of just 2.5% to 6.25 million from 6.1 million a month earlier.

The sales total was also a huge improvement over a year ago. Sales rose 45.7% over the paltry annualized rate of 4.49 million units during November 2008.

The contribution made by first-time buyers is evident in a separate survey NAR conducted of its members. They estimate that 51% of sales in November were by newcomers to the market, up a point from 50% in October. Normally, first timers account for about 40% of sales.

Also propelling sales higher were rock-bottom interest rates. The average for a 30-year, fixed-rate loan during the month was just 4.88%, down from 4.95% in October and 6.09% a year ago.

With rates that much lower, homebuyers can save more than $150 a month on a $200,000 mortgage.

The industry expects home sales to slacken December, partially because of the tax credit's originally scheduled demise. That caused some buyers to push up their closing, stealing sales from December.

However, sales will not fall off a cliff, though, according to Walter Molony, a NAR spokesman. "The psychology seems to be turning around," he said. "Potential buyers, who had been staying on the fence, now believe we're at or near the market bottom."

One X-factor, however, is the vast numbers of homes that may come to market over the next few months. There is a large "shadow inventory" -- homes owned by banks and mortgage companies -- that have not yet been put up for sale. It could be as many as 1.7 million units, according to First American CoreLogic.

In addition, another spate of foreclosures could be hitting the market as a number of option-ARM mortgages are set to default.

All that may drive prices down, according to Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream." And the impact of these renewed price declines could again alter the market psychology.

"People think that prices have bottomed," she said. "I don't think they have. People will see price declines and that will discourage them from buying."

Mike Larson, a real estate analyst with Weiss Research has preached all through the bust that price declines are what will "fix" the housing crisis.

"We needed to see prices fall to make ownership competitive with renting again, and to restore the normal relationship of house prices to income," he said. "That has now happened and you're seeing buyers come out of the woodwork as a result."

Still, they will have to come out in large numbers to offset the inventory overhang in some of the worst markets, according to Olefson. In the Florida condo market, for example, there is a 35-to-40 month supply of units at the current rates of sale, she said.

Prices still almost certainly have further to fall.

Ballot Measures 66 & 67's Effect on Business

I have been seeing a lot of ads for and against ballot measures 66 and 67 recently, and just received this article from the Oregon Association of Realtors.  Being an independent contractor that has to pay taxes out of my pocket, besides paying thousands of dollars every year in desk fees and marketing costs, a gross receipts tax would definitely hurt my business.  While I do understand the need for more revenue in this tough economy, I don't think hitting businesses is a great way to do it.  Furthermore, this would be a permanent solution to a temporary problem.  In order for Oregonians to have jobs, we need businesses to be hiring and coming to Oregon.  If we continue to add taxes, how are we going to attract more large companies to move their operations to Oregon?  We have one of the highest unemployment levels in the country, and I believe these kinds of taxes are part of the reason why. 

Below is a recap of the effects of these measures on Oregon business:

New, permanent taxes will hurt all Oregonians and businesses

In the midst of the worst economic crisis in more than 70 years, the legislature increased overall state spending by $4.7 billion and voted to permanently increase taxes on businesses and higher-income Oregonians by $733 million - the biggest tax increase in Oregon history.

During the 2009 legislative session, a unified business community strongly opposed the permanent tax measures and proposed a balanced, short-term solution that essentially matched spending cuts with temporary, broad-based tax increases. Virtually the entire business community supported raising the corporate minimum tax. The legislature chose to ignore the recommendations of the business community to pursue new, permanent tax increases, including a gross receipts tax of up to $100,000 on businesses that are not making a profit. 

The Oregon Association of REALTORS® Opposes Ballot Measure 66 & 67 for the following reasons:

1) Since the start of the recession, Oregon has lost 131,500 private sector jobs according to the Oregon Employment Department. In November, 64.4% of Oregonians were employed; the lowest labor-force participation has been since 1978. With unemployment at 11.1% and 211,424 Oregonians out of work, leading economists estimate that the new, permanent tax increases will cost an additional 70,000 Oregonians their jobs. The new, permanent tax increases are projected to further depress the struggling Oregon economy, negatively impacting efforts to stabilize and stimulate the real estate market. It is no secret that Oregonians must have jobs if they are going to be able to purchase and maintain a home. 

The health of the real estate market in many regions of Oregon is directly tied to in-migration from other states. With the highest marginal income tax rate in the nation, Oregon will become less appealing for relocation for businesses and individuals. In addition, the taxes will have a direct impact on the Multiple Listing Services, as a gross receipts tax has a disproportionate impact on those businesses that have high volume (regardless of any actual profit).

 

2) Tax proponents portray Measure 66 and 67 as the only way to fund education and other essential public services. This is simply not true. The Oregon REALTORS® are supportive of a strong education system and protecting essential community services. The fact is the 2009-11 General Fund budget is $485 million higherThe touted budget "cuts" actually reflect an increase in spending, just a smaller increase than anticipated. The legislature has an array of options (including $1 billion in cash reserves), and could maintain current budgets by using existing state agency cash reserves, reducing personnel costs or potentially pursuing a more responsible, short- term tax measure.   than it was in 2007-09 and includes $259 million in salary increases for state employees.

3) The corporations that pay Oregon's current $10 minimum tax are businesses that have not made a profit or have no taxable income. Businesses that make a profit pay the corporate income tax on those profits. Measure 67 changes the $10 flat fee for businesses that have no taxable income to a sliding scale between $150 to $100,000 -- based on a company's gross sales, not net profits. This new gross sales tax disproportionately impacts high-volume sales, low margin businesses like home builders, grocery stores, restaurants and gas stations. 

In fact, most states have no minimum tax on businesses that aren't making a profit. Among those states that do levy a minimum tax on corporations with no profit, 17 charge an average of $200. All but two of these states have a flat rate minimum, like Oregon's. Only New York and Minnesota have graduated minimum taxes based on total sales, similar to Measure 67. Those two states levy a maximum fee of $5,000. The legislature's proposal would tax companies with no profits from $150 to $100,000 -- 20 times as much for the privilege of operating and losing money in Oregon, giving us the highest corporate minimum or 'no profits' tax in the country.

4) Measure 67 amounts to a 40% total increase in state corporate taxes for 2009-11. The corporate income tax rate will go from the current 6.6% to 7.9% in 2009 and 2010. That's nearly a 20% increase in just one of the three components of Measure 67's corporate tax hike. (Corporate income tax increases, corporate minimum tax increase based on gross sales and corporate filing fee increases.)

5) Under Measure 66, the tax rate goes from 9 to 10.8 % for individuals earning more than $125,000 a year and from 9 to 11% for individuals earning more than $250,000 a year. This gives Oregon the second highest income tax rate in the nation -- higher than both New York and California. Furthermore, according to the Legislative Revenue Office, 66% of tax filers targeted in the personal income tax increase are small and family-owned businesses and farms who report their business profits on their personal income statements.

6) The proposed tax increases would be retroactive to January 1, 2009, and no money to cover the tax increase has been withheld from Oregonians' paychecks during all of 2009.  

To learn more about Ballot Measure 66 & 67 visit:

Ballot Measure 66

Ballot Measure 67

 

For more information about the campaign in opposition to the tax measures, visit: www.stopjobkillingtaxes.com

The economic studies below illustrate the negative impact the new, permanent tax increases pose to Oregon's economy and job market.

William B. Conerly, PhD, a Portland-based economic consultant and former Senior Vice President of First Interstate Bank, estimated the personal income tax increases in Measure 66 would cost up to 36,000 Oregonians their jobs by 2015.  

Taxing the "Wealthy" More Will Cost 36,000 Oregon Jobs

Bill Conerly

Another leading Oregon economist, Randall J. Pozdena, PhD, examined the impact of the business tax increases on Oregon employment.  He estimates that, over a 10-year period, the business tax increases in Measure 67 would cost 22,000 to 43,000 Oregonians their jobs – on top of the 30,000 lost to the personal income tax increases.  These job losses would be in addition to the 131,500 private sector jobs Oregon has already lost in this recession.

Raising Oregon's Corporate Income Tax Rate Will Cost 43,000 Oregon Jobs

Randall Pozdena

The Role of Housing in Recession Cycles

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This is an interesting article I got from a mortgage banker named Joe Conyard with Prospect Mortgage. I thought the information was quite interesting.

Housing plays a substantial role in the U.S. economy. One method of measuring the impact of housing in the economy is to calculate the total amount of capital exchanged in home construction, remodeling, and fees associated with the buying and selling process. Together, this sum is known as the residential fixed investment (RFI). The RFI has averaged 4.8% of the U.S. gross domestic product (GDP) since recordkeeping began in 1947. If you add household-related investments, furnishings and rents to the RFI, the contribution of housing to GDP has averaged about 21% since 1947.

Housing is considered a leading indicator of economic cycles. The housing market will slow in advance of a recession, indicating an economic contraction. Conversely, the housing market tends to expand before the end of a recession. RFI often turns positive one-to-two quarters prior to the end of a recession. In six out of the last nine recessions since 1947, RFI turned positive during or before the final quarter of the contraction.

Most recently, RFI peaked at 6.3% of GDP in the fourth quarter of 2005, the highest level since 1951. RFI fell to 2.4% of GDP in the second quarter of 2009, dipping below the previous low of 3.2% set in the third quarter of 1982. On the rebound, GDP turned positive for the first time in a year in the third quarter of 2009. The RFI increased to 2.5% of GDP. So the current RFI pattern follows the majority of contractions since 1947: RFI was increasing during the first quarter of GDP growth leading out of the current recession.

The latest report for new home sales showed a 6.2% monthly increase. That left the inventory of new homes for sale at the lowest level in nearly four decades. Look for builders to start building soon and the most important component of the RFI — home construction — to increase.

Flying - Not What It Used To Be

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After two long fights in the last week, it made me think about how much flying has changed over the years.  I remember the days when I used to enjoy flying.  These days however, I can't think of much in life that is more stressful or physically taxing than flying.  Since 9/11, security has become more and more painful, and when the airlines lost all of their money they cut service to the bone!  I remember when you used to get beer and wine for free on international flights.  I also remember when you didn't have to take off your shoes, take your laptop out of your bag, bag up your tooth paste, mouthwash, etc, and everything else you have to do now. Now some of this security is necessary, but some is just a little over the top!  I also remember when you used to get served a meal, or at least a decent snack on 4-5 hour domestic flights.  Gone are these days. 

Still, I think changes could be made to bring it back.  Why not just charge $5 to everyone and start serving sandwiches again?  I wouldn't notice when I'm paying $5 on a $500 plane ticket, but I do notice when I'm sitting on the plane and having to pay $5-$8 for a gas station quality turkey sandwich.  Furthermore, when I was flying back from Pennsylvania last year, we had to pay for water!!!  We're talking about a cross country flight and I have to pay for water?  Come on!  On top of that they only took cash and I had spent all of mine the night before.  At least United only take cards now which makes it easier.  Either way, the service just isn't in flying anymore.

I would also suggest the way baggage is handled needs to be looked at as well.  I understand that bags add weight and thus cost money, but there has to be a better way.  In my experience what charging for bags has done is forced everyone to use huge carry on luggage.  Now instead of checking that bag, they bring the same amount of stuff, and roll it onto the plane in a giant wheely bag.  Now all of the carry-on bins are full of roller bags large enough to hold a body.  Then when I get on the plane, I have to put my backpack at my feet, and thus reduce my 4" of legroom down to 2".  No better way to spend 4 hours than sitting in a seat with your knees to your chest.    

Maybe I should start a new business as an airline consultant.  Like every service industry, it's time to start thinking about things from the customers point of view, not just the bottom line.  I understand it's an industry with razor thin margins, but if you treat people well, they will come back!   By the time I'm done, we'll be eating peanuts, drinking diet coke, and actually enjoying our flights around the country. 

PDX - A Great Ambassador for Portland

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As I sit here waiting for my delayed flight to Chicago, it makes me appreciate how nice PDX really is.  I sit here in a clean chair, looking at nice vacuumed carpet, and have FREE wifi.  While I'd rather be sitting on my plane moving toward my destination, I have not been in many airports that will keep me as comfortable as PDX.  I think the free wifi is key as it allows me to be productive, get work done, and even keep up with the news while I'm waiting.  There are regional restaurants that don't serve 'fast food', plenty of little shops, and even kiosks.  I still think the thing I appreciate the most is just how clean it is compared to other airports.  On top of that, it seems like the people working here are more friendly and attentive.  I know any person on any given day can can be gruff, but nearly everyone I've talked to here has been more than happy to offer assistance.  If  you are coming into Portland for the first time, or just stopping on your way to somewhere else, I think it's a great representation of our city.  I just wish every airport was modeled after PDX.  It sure would make those 5 hour layovers a lot more tolerable!

Treasury sets guidance to simplify "short sales"

By Al Yoon Al Yoon Mon Nov 30, 6:58 pm ET
 

NEW YORK (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed "short sales" of homes and other loan modification alternatives to stem a rising tide of foreclosures.

The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury's website.

Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.

The incentives, first announced in May, expand on the government's Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 trial modifications they have started.

"While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve" or offer a modification, the Treasury said in its announcement.

Financial incentives for completing short sales or similar deed-in-lieu transactions -- in which the deed is simply transferred to the lender -- include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would receive $1,500 in relocation expenses.

Short sales are favored by real estate agents and community groups over foreclosure because they can preserve the borrower's credit rating and leave the property in better condition than when a homeowner is evicted. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure.
But short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.

It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

In one of the most contentious issues gumming up negotiations between lenders, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.

Second lien holders in recent months have begun demanding more money from the first lender, seller, buyer or agent in exchange for releasing their claim, agents have said. Because primary lenders would face larger losses in a foreclosure, some subordinate lenders have felt empowered, the agents said.

The largest second-lien holders are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc.

Second lien holders may proceed with a short sale outside of the Treasury program, if they felt the cap was too low, a Treasury official said in October.

"If there was a short sale program that didn't recognize the second lien holder position, it could have pretty damaging consequences for the industry," Sanjiv Das, chief executive officer of CitiMortgage, said in an interview last week.

(Editing by Leslie Adler)

Deployed Magician Brings Laughter, Entertainment to Iraq

This is another great article about Scott Anderson who is serving in Iraq:

Deployed Magician Brings Laughter, Entertainment to Iraq

By Spc. Beth Gorenc, Task Force 38 Public Affairs



JOINT BASE BALAD, Iraq, - Often National Guard Soldiers apply their civilian training to enhance their military deployments. A Soldier in Task Force 38's medevac unit, Company C, 7th Battalion, 158th Aviation Regiment did just that during his mobilization here.

When the Canby, Ore., resident was not using his military skills as a medevac pilot for Company C to help people receive medical attention during Operation Iraqi Freedom, Chief Warrant Officer William S. "Scott" Anderson applied his civilian skills as a magician to help people in a different way.

Anderson used illusions mixed with comedy to provide an escape from deployment life and entertain fellow servicemembers, civilian contractors and local Iraqis.



"He's professional when he needs to be, but he can lighten the mood when it's needed," added Sgt. John McCully, a medevac crew chief and Camas, Ore., resident.

In his free time, Anderson performed frequent shows at the medevac company's coffee shop, during holidays and at unit events. He also participated in, and won, Joint Base Balad's October talent show.

"He has helped the moral of the company," said McCully. "Whenever we have events, at work, pretty much whenever he's around, the guy has a gimmick up his sleeve. He loves entertaining people."



Anderson's illusions ranged anywhere from impromptu card tricks for friends, pulling a participant's previously signed dollar out of an uncut lemon randomly chosen by that participant, to transforming handkerchiefs into candy for Iraqi children.

Anderson also used his magic and comedy as a way of breaking the ice with new people around JBB and forming relationships with Iraqis.

"He is good at building relationships with people," said Sgt. Candice Westlund, Corvallis, Ore. resident.



Anderson worked through translators to perform shows for groups of Iraqi children during base-hosted events and completed illusions for the Iraqi special weapons and tactics officers. He also worked with parents to entertain children under care of the hospital here.

"His tricks make kids smile and forget that they are in pain or injured," said Westlund.

While entertaining others and helping them through the deployment, Anderson said his magic provided an outlet for him.

"It's a piece of home I got to bring with me," he said. "It's something I can do that's fun, and it is good for stress."



Anderson has been a performance magician since 1999. He started entertaining elementary kids at Fort Lewis, Wash., during drug abuse resistance education he taught by using illusions he learned from a friend. From there, he expanded his audience to birthday parties, state fair goers and stage acts including large scale illusions.

"The better I got, the more shows I could get," Anderson said. "I was doing side jobs at nights and on weekends."
When he deployed to Afghanistan, Anderson continued his magic shows to entertain Soldiers and Afghanis. He continued to develop his shows by incorporating personal experiences from his deployment, and then used those experiences to once again entertain Soldiers and Iraqis during his latest deployment.
While magic proved beneficial during times overseas, it was those same deployments and experiences that proved beneficial to Anderson's magic career.

Chief Warrant Officer William "Scott" Anderson, a Canby, Ore., resident and medevac pilot for 7th Battalion, 158th Aviation Regiment, performs illusions for an injured Iraqi child at the Joint Base Balad hospital. Anderson provided magic shows, mixing illusions with comedy for Americans and Iraqis during his deployment to Joint Base Balad, Iraq. U.S. Army photo contributed by Chief Warrant Officer Scott Anderson (released)

New Home Construction - Numbers Down

Today I read an article on CNNMoney.com that spoke of the current numbers that are associated with the current construction of new homes.  Overall, the numbers are down, and down more than anyone predicted.  According to the article:

Homebuilders began construction at an annual rate of 529,000 new homes during the month, 10.6% below the revised September rate of 592,000 and 30.7% below the 763,000 rate during October 2008. It was the lowest level of housing starts since April, when the annual rate was 479,000.

A panel of industry observers compiled by Briefing.com had forecast housing starts of 600,000 during the month. It was the second month in a row of dashed housing start expectations.

"The numbers stink," said real estate analyst Mike Larson of Weiss Research. "They're negative across the board."

That weakness included the number of building permits issued in October, which fell to seasonally adjusted annual rate of 552,000. That was 4% below the revised September rate of 575,000 and 24.3% below the October 2008 estimate of 729,000.

The slowdown in construction means that there are many fewer new homes for sale, about 251,000 in all. That's the smallest inventory since 1983, according to Larson.

"The new home market, which was dramatically oversupplied during the boom, is now dramatically undersupplied," he said.

I am torn on whether this is good or bad. I know for the short term, this is a bad thing. Home building produces a lot of jobs and when building is up, usually the economy follows. However, I see the last sentence in the quote and I see that as a positive. We have been dealing with falling home prices across the board, and the only way I see that changing is if we don't have the inventory. It's economics 101, when supply is down, prices go up! So, if we want home values to start increasing, we need to get inventory down. If there aren't new homes to be purchased, people will have to buy existing homes.

However, I hope this isn't a long lasting trend. I would like to see new homes being built. I have seen a bit of a gain locally, but I don't have the numbers. I would also think part of the problem with new home construction is the instability to get construction financing. I've known several builders that have tried to get projects up and running and they simply can't get the money to do it. So, until banks start to loosen their lending guidelines on new construction, I think this will keep its slow recovery.

Time will tell, but in the long term, I don't think this is a terrible thing.

Sansai Sushi - NW 21st Portland

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Last night I was in the mood for sushi so I went to SanSai Japanese Grill on NW 21st Ave in Portland.  I cannot say that it is the best sushi I've ever had, but for the price it's tough to beat.  I've read reviews talking about how there is poor service, but I did not experience that what so ever.  The guy that helped me was actually quite friendly and the food was back in short order.  The best part about SanSai Japanese Grill is they have a selection of rolls that are half priced all the time!  So, if you are looking for some quick cheap sushi, without it cruising by on a track, I would recommend SanSai on NW 21st Ave.

Portland Housing Inventory Lowest Since August 2007

I just received the latest market action report and there is more good news coming out of the Portland, OR real estate market.  Inventory for the Portland Metro area is down to 6.5 months which is the lowest since August of 2007.  If you don't know what inventory is, the simplest way to define it would be to say that if no other houses were listed for sale, it would take 6.5 months to sell all of the homes currently on the market. 

While this may not mean a lot to the average person, but for people trying to sell a house, this is great news!  Basically it says that houses are moving!  Let's hope this trend continues and the potential for and $8000 or $6500 tax credit is pretty enticing! 

Thank You Veterans

On a day like today it's easy to give a quick thought to our veterans. At least I hope it's easy as it's a day set aside to do just that.  However, I look at the life I have here in the US and take it for granted most of the time.  I've never served in the military, but have thought about it many times.  I actually grew up wanting to be a fighter pilot, but I think most of my generation did after 'Top Gun'.  However, that was not the course I took in life. 

That being said, I look at the times when my Grandfather and my Dad were my age and must be thankful that the world has changed since then.  My Grandfather was in the navy during WWII as were almost all able bodied American men during the early 1940's.  Had my Dad not been in a motorcycle accident and broke his femur, he would have gone to Vietnam.  Now say what you want about the politics of the current wars, or even the first Iraq war, but here is what I see.  We are still an all volunteer army and there are not near the death totals from previous wars.  You can take a single day in either WWII or Vietnam and it has to be close to the casualty totals for the entire war we are currently fighting.  Now I don't say to take away from what the current soldiers are doing, but instead to say that I'm glad that the officials in charge are starting to see the value in human life.  These are not just soldiers, but they are people with families and friends back home.  They have hopes and dreams and are not just expendable pawns. 

These people are giving up months and years at home in order to serve our country.  How many of you out there could leave the life you are living for a year at a time???  I know it would be almost impossible for me.  So for that, I thank you veterans!  The sacrifices you make are far beyond just putting your life on the line every day.  May you all come home safely and to thankful and open arms from everyone here at home in the US. 

Details of First Time Home Buyer Tax Credit

Home Buyer Tax Credit - The New Credit is Signed into Law!

Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000 Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.


What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.


How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.


Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession
2. Right to obtain legal title upon full payment of the purchase price
3. Right to construct improvements
4. Obligation to pay property taxes
5. Risk of loss
6. Responsibility to insure the property
7. Duty to maintain the property

Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit

Scott Anderson - The Army's Way To Win Hearts and Minds of Iraqis

This is an actual e-mail I got from my buddy Scott Anderson who is currently serving in the Army in Iraq:

There is this town to the Southwest of our camp, that is the primary source of all rockets and mortars being launched into our base (average 15 attacks per week since May). In an attempt to win over the hearts and minds of the tribal elders the military decided that we would host a day and cater to these peaceful gentlemen and their children. The theory was that, we would get to know them....they would get to know us....and that they would feel bad knowing that they were attacking their friends. Overall the day was a success....if not for one MAN!!! (now honestly, are any of you feeling any suspense at all as to who I am going to start talking about?....I didn't think so) That man was none other than ME! I was asked to be the highlight of the field trip for these fellow Iraqi's and perform a magic show for the 100 or so kids that would be coming, as well as some magic for the Tribal Elders and/or their representatives. I can tell you that the event was not going nearly as well as the military planners had thought it would. I mean everyone was having fun and all, but there really didn't seem to be any connection between anyone....until the "ringer" showed up! Afterwards they couldn't get the Iraqi's to leave, they wanted pictures with everyone, they wanted to ride our bikes, play games, learn English (although I don't think that learning English from U.S. Soldiers is a good idea), and most of all....see more magic. I was even requested by the Iraqi Head Honcho to perform a private show for him and his family! For some reason it was a real big deal to do that. So all in all it was a real fun day. I signed my autograph on over 100 playing cards for the kids and their parents, and they all went away smiling and asking when could we do this again. As far as any more rocket and mortar attacks......only time will tell......but if it works, as one Air Force Colonel put it, "It was 90% because of that Army guy who did those (insert expletive here) up, crazy magic tricks." Here are some pictures from the day.

Scott, The Army's Newest Weapon, Anderson

First Time Home Buyer Tax Credit Extended

It's official, with a vote of 98-0 in the Senate, the first time home buyer credit has been extended to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.

The Senate's bill also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.

The Senate bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

"It's gonna put people back to work, the home builders, put people in the real estate business," said Sen. Chris Dodd, D-Conn. "The kind of jobs that can make a difference."

The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation. Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.

By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.

"The data on the present home buyer tax credit show that the credit has had its intended impact -- sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably," said Ron Phipps, the association's first vice president, in Senate testimony last month.

The credit, however, has also posed many problems. Critics say it's a waste of money because most of those claiming the credit would have bought homes anyway. It's also been the target of fraud. Some 74,000 people claimed more than $500 million in credits even though they may not be first-time homeowners, according to Treasury officials. And more than 580 children, including some as young as 4-years-old, have claimed the credit. "Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the Credit and receiving an erroneous refund of up to $8,000," said J. Russell George, Treasury inspector general for tax administration, before a House subcommittee last month.

On a separate note, the FED decided to leave interest rates at near 0%. This will effect things like credit cards and home equity lines of credit. It's also an indicator on inflation. According to the articles I've read, most people believe it will be next spring or summer before they start to tick up.

Tillamook Cheddar Cheese

Oh Tillamook Cheddar, I try to ignore you when I am walking down the isle of the grocery store, but you call me in like a siren song. I think about all of our good times making grilled cheese sandwiches, putting you in mac and cheese, or just eating you plain. Now you may not be the flashy cheese , or the party cheese like a Gouda or Brie, but Tillamook you're oh so steady. I can put you on anything and the meal instantly tastes better. I have never have a bad experience with you oh Tillamook Cheddar, and appreciate your steady cheesy goodness. I could go on like a Billy Mays infomercial and tell you about all of cheddar's uses, but you already know them! So, as every 4th grader in America has said at one point or another, 'If you love it, why don't you marry it?!?' Maybe I will!

Tax Credit Extension

I have been getting a lot of questions about both the current first time home buyers tax credit, and the proposed extension. The main question regarding the current tax break is whether or not it's too late to take advantage. In simple terms, it depends. Most likely if you need FHA or conventional financing it's too late. With the delays in funding and the Thanksgiving holiday, it's going to be tough to get it closed by the end of November. However, if you have cash or a really fast mortgage broker, it is still possible. So, I would say try to close by the end of the month, but home it gets extended.

Now, as for the proposed extension, there are actually some new things being added that could help out. First off, it allows the current credit to be extended until the end of April 2010. According to Bloomberg, there is also another key addition to the bill. They stated that:

Homebuyers who have lived in their prior residences for at least five years may receive a credit of $6,500 under the plan, said Senate Finance Committee Chairman Max Baucus. Also, couples earning as much as $225,000 and individuals as much as $125,000 would qualify for the extended break, Baucus said. That’s up from a $75,000 limit for individuals and $150,000 for couples.

If this is the case, I think this will be huge! This will give incentive for those people that have been considering upgrading a reason to pull the trigger. It will also bring new inventory to the market for the first time home buyers. From what I've read, we should have a vote on the bill this week. I'm crossing my fingers and I would suggest calling your senator to be sure they vote for it!

I'm always here for questions if you have them!

Inventory

I have been asked several times lately if it is still a 'Buyers Market'. In looking at the inventory listed in the latest 'Market Action Report' which is put out by RMLS, it still is. However, it is not as strong as it was at the first of the year. In January of 2009 we had 19 months of inventory. Now for the non-Realtor, here is a simple definition of 'inventory'. In January, with all of the listings that were on the market, it would have taken 19 months to sell them all if there wasn't a single new listing that hit the market. However, sales have sped up dramatically to the point where we've been hovering between 7 and 8 months of inventory for the last 3-4 months. That is great news!

So now comes into questions what is considered a buyers vs. sellers market. Traditionally 6 months worth of inventory is considered a neutral market. If you have more than 6 months it's a buyers market and if you have less than 6 months it's a sellers market. So now you see why I say it is still a bit of a buyers market.

Now, outside of the simple numbers, I have seen a few things. If you have a nice house that is in a decent area, well kept, and priced right, I've seen multiple offers inside of 30 days. If you are priced too high, or your house isn't in good condition, it will sit for ages. Unlike years past, buyers won't just buy anything anymore. They are getting more picky, but not unreasonably so. You just have to be placed right in the market, and you will sell your house!

As always, if you have any specific questions about your home I'm happy to answer them for you. Enjoy the Oregon rain, and avoid H1N1 and the stupid cold that is going around!

Great Happy Hour Food

If you are looking for a great spot for an eating happy hour, Fenouil, said (fen-wee) in the Pearl is great. They aren't huge portions, if you want that, go to Jakes, but it is high quality food. The appetizers were about $3 and the entrees were about $7. Considering how good the food was, it's a steal! I've heard their brunch is quite possibly the best thing ever, but I haven't tried it yet. It's conveniently located on the streetcar line and abutting to Jamison Square.

For more information, go to their website:

http://www.fenouilinthepearl.com/

Oregon homeowners facing foreclosure have new rights

Salem, OR - September 28, 2009 — Today a new law takes effect that strengthens the rights of Oregon homeowners who face foreclosure to help more families stay in their home during this difficult economic climate.

Senate Bill 628, passed by the 2009 Oregon Legislature, requires lenders to meet with borrowers facing foreclosure – either in person or by phone – and evaluate whether they qualify for a loan modification. A loan modification could help borrowers lower their monthly payments and keep their home.

―Oregonians are confronting a number of challenges during this economic downturn, including a growing number of families at risk of losing their home through foreclosure,‖ said Governor Kulongoski. ―By requiring lenders to meet with homeowners, this law provides Oregonians another avenue to avoid foreclosure and stay in the home they worked so hard to attain.‖

Starting today, foreclosure notices that are sent to homeowners who are late on their mortgage payments include new information about how to meet with their lender and how to request a loan modification. If the borrower requests it, lenders must meet with the borrower and evaluate the borrower for a loan modification before foreclosing on the home. The meeting can be by phone, and it must be with a person who has or can get authority to modify the loan.

―Many homeowners may qualify for a loan modification, but often have a difficult time getting in touch with the right person at their lending company,‖ said Sen. Suzanne Bonamici (D-Washington County/Portland), chair of the Senate Consumer Protection Committee, who proposed the legislation. ―This law gives Oregonians the tools they need to potentially save their home.‖

Oregonians who are seriously behind on their mortgage payments should watch their mail for the new foreclosure notice. Once they receive the notice, they should immediately take the following steps:

1. Call their lender to set up a meeting to discuss a loan modification.
2. Fill out the loan modification request form provided in the notice.
3. Call 1-800-SAFENET and ask to be referred to a nonprofit foreclosure counselor. The counselor can help homeowners request a loan modification.

Homeowners should act fast – they have 30 days from the date of the foreclosure notice to request a loan modification.

―Many homeowners in trouble may feel hopeless, but they do have options,‖ said Cory Streisinger, director of the Department of Consumer and Business Services. ―The key is they need to be proactive to benefit from this new law, as well as the other resources available to them in Oregon.

The Department of Consumer and Business Services has been working with the Department of Justice, Oregon Housing and Community Services, the legislature, and consumer groups to protect Oregonians from mortgage fraud and provide resources to homeowners facing foreclosure.

―In this tough recession, we need to do all we can to keep Oregonians in their homes,‖ said Attorney General John Kroger.

The agencies have provided funding for foreclosure counseling using proceeds from Oregon settlements exposing mortgage fraud. Homeowners can call 1-800-SAFENET or log onto www.211info.org to find a counselor in their area.

The state organized the first Homeownership Preservation Event (HOPE) in Portland in May, where homeowners could meet with counselors, lenders, and attorneys and attend workshops on preventing foreclosure. A second event is scheduled for Saturday, Oct. 17, in Medford, at the RCC/SOU Higher Education Center. To register, go to www.access-inc.org or call 541-774-4305.

In addition, the state launched a new Web site for homeowners at http://foreclosurehelp.oregon.gov. The site contains information and resources to help homeowners prevent foreclosure, avoid scams, and better understand the foreclosure process.

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The Department of Consumer and Business Services is Oregon’s largest business regulatory and consumer protection agency. For more information, visit www.dcbs.oregon.gov.

For more information:
Lisa Morawski, 503-947-7897

I Don't Understand

I read the following article on Oregonlive.com, and don't understand how it is possible to award this woman money. I think this symbolizes everything that is wrong with the civil court system in America. It doesn't matter what the situation is, if a government entity is involved, you will get money. In this situation, the article states that a woman dressed in all black, crosses TV highway in Beaverton, without a crosswalk, at night, and is hit by a police officer. For some reason the jury awarded the lady $500,000 saying the officer should have seen her. Why?

It's a person in black at night, in a place where there shouldn't be pedestrians! If you are making a bad decision, and get hurt, why should you be rewarded? Don't get me wrong, this is a tragic accident and I'm sure both the woman and the officer have had long term ramifications. But why reward bad behavior? She made a bad choice, and the taxpayers of the City of Beaverton are paying the price. I don't agree with this and am tired of these cities having to pay 6 digit settlements over and over again. I've seen it with the protesters that come into the city and intentionally cause problems. When they are treated as the criminals they are, they sue and the city pays instead of fighting because it's 'cheaper'. However, what are the long term costs of the policy that says, 'Sue us and we'll pay'. I think that is far more expensive!

TIME FOR $8000 TAX CREDIT RUNNING OUT

I have been getting a lot of questions recently about the soon to expire $8000 tax credit. So, the first and most important thing to know is the sale has to close by November 30, 2009. This does not mean you have to write an offer by then, you have to be funded and recorded by then. So, that means the window to take advantage is rapidly closing. As for the rest of the terms, there is a quick summary:

Qualifying first-time homebuyers can claim 10% of the purchase price up to $8,000, or $4,000 for married individuals filing separately. The credit is available for purchases completed on or after January 1, 2009, and before December 1, 2009. The credit is refundable, meaning recipients receive a check for any claim amount beyond what’s owed in taxes.

Eligibility for the first-time homebuyer credit is determined by the date of the completed purchase, not the date of occupancy. One exception is if the home is being constructed, then the date of occupancy is considered the date of purchase. The home must be used as a primary residence (generally defined as where an individual spends more than 50% of their time). To be eligible, the buyer, or either spouse, cannot have owned and used a home as a primary residence within the last three years. A taxpayer who owned a rental property but not a primary residence within the past three years is eligible for the credit.

The credit does not have to be repaid unless the home is sold or ceases to be the primary residence within three years. There are some exceptions: homes sold as part of a divorce settlement, homes destroyed in a natural disaster, homes subject to condemnation, etc.

To be eligible for the credit, the home cannot be inherited, received as a gift, or purchased from a spouse or related person. The credit applies to any type of new or existing dwelling. Even some houseboats and manufactured homes used as primary residences are eligible. The $8,000 tax credit phases out for individuals with modified annual gross income (MAGI) of $75,000 to $95,000 and married couples with MAGI of $150,000 to $170,000.

If you qualify for the first-time homebuyer tax credit, you can fill out the IRS Form 5405 and claim this amount on line 67 of their 1040 income tax form for 2009. For more information, visit the IRS Newsroom.