After watching the news, it is very easy to get discouraged about the housing market. There is so much uncertainty out there and if you let it consume you, it will! What I have seen is that things aren't really as bad as they are portrayed. Real Estate is moving slowly these days, but it is moving. I think that everyone is just trying to figure out what the ramifications are of the stimulus bill and the other things government is throwing at the economy. What I see is that most of these things are going to have very little impact in the short term. What I also see is that rates are insanely low right now and buying power is at a high. Even if the economy does come back, I think rates will have to go up to hedge inflation. So, even though the price of the homes may drop slightly, the change in rate will more than make up for the savings.
If you look at the Forbes article, it does a pretty good job of explaining what's going on. As expected, the top 5 worst cities are: 1) Las Vegas 2) Phoenix 3)Detroit 4)Minneapolis and 5) San Francisco. The top five BEST Markets are 1) New York 2)Washington DC 3) Charlotte NC 4) PORTLAND, OR and 5) San Diego.
I just find this odd as they are all very different markets. Seeing San Diego in the top 5 helps though as many of the people coming into Oregon are from Southern California. Hopefully this trend continues. As always, if you have any questions feel free to call or e-mail me. Also, my website always has updates: www.aaronstelle.com.
To see the Forbes article go to: http://realestate.msn.com/article.aspx?cp-documentid=18080758
Wednesday, February 25, 2009
Tuesday, February 17, 2009
Congress Dropped the Ball - The Skinny on the $8000 Tax Credit
I was really hoping that congress would actually do something to help our current situation with the housing market, but I think they dropped the ball on this one. Initially the Senate version of the economic stimulus bill had a provision that allow anyone purchasing a home to get a $15,000 tax credit. There were certain restrictions on it, but it seemed to be fairly open ended. Had this happened, I have talked to several people that would have jumped off the fence and pulled the trigger on a home. The reason I see this as such a huge advantage over the current first time home buyers credit of $8,000 is simple.
First time home buyers are traditionally the younger buyers who have been at their jobs between 2-5 years. Well, these are the exact workers that are getting laid off right and left. I think many of these people are going to let the $8,000 credit pass them by as they are more worried about heir job security than stepping into their first home. Furthermore, there has been a $7,500 credit in place for some time and it hasn't done anything. Secondly, in watching the market as I do, the homes that need to sell aren’t the lower end homes. Where I see a gluttony of inventory is in the price point above $300,000. I think part of the blame goes to the builders for overbuilding these types of homes, but that isn’t the issue. Had they passed the $15,000 tax credit, I could see a lot more middle income people stepping up and buying that upgrade. The prospects of getting a $15,000+ tax return would be pretty enticing.
That being said, here is a quick scenario I pulled from cnn.com which explains how the actual $8,000 tax credit does work:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
As always, if you have any questions feel free to give me a call or shoot me an e-mail.
First time home buyers are traditionally the younger buyers who have been at their jobs between 2-5 years. Well, these are the exact workers that are getting laid off right and left. I think many of these people are going to let the $8,000 credit pass them by as they are more worried about heir job security than stepping into their first home. Furthermore, there has been a $7,500 credit in place for some time and it hasn't done anything. Secondly, in watching the market as I do, the homes that need to sell aren’t the lower end homes. Where I see a gluttony of inventory is in the price point above $300,000. I think part of the blame goes to the builders for overbuilding these types of homes, but that isn’t the issue. Had they passed the $15,000 tax credit, I could see a lot more middle income people stepping up and buying that upgrade. The prospects of getting a $15,000+ tax return would be pretty enticing.
That being said, here is a quick scenario I pulled from cnn.com which explains how the actual $8,000 tax credit does work:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
As always, if you have any questions feel free to give me a call or shoot me an e-mail.
Wednesday, February 11, 2009
THE MAGICAL 4.5%
For some reason, 4.5% is a new buzz word when it comes to mortgage rates. I thought this was a good little Q&A from a mortgage broker I work with:
The media has been flooded with news of mortgage interest rates going to 4.5%.
I have had countless inquiries about this and wanted to send a little explanation of what really is happening in the world of rates.
First of all, interest rates HAVE improved significantly. Have we reached that magical 4.5% number everyone is talking about?
No, but top tier clients (740+ credit and 30% or more equity) are getting 4.875%.
The promise of 4.5% rates that we are all waiting for it needs to be examined in detail to fully understand why it is unlikely to happen solely based on the actions of the FED.
Didn’t the FED say they were going to lower rates to 4.5%?
The FED did not say that they would bring mortgage rates to 4.5%, in fact no one, not even the FED has the ability to set mortgage rates.
The FED simply said they would buy mortgage backed securities to help lower rates and keep them low.
The magical 4.5% number was simply an educated guess at the outcome of the actions of the FED.
This was a report that was flooded into homes across the country by the news media.
What IS the Fed Doing then?
The Fed Has been buying mortgage backed securities as they said they would.
However the ones they are buying are the 5.0% and 5.5% bonds which represent outstanding loans at 6-6.5%.
This is a smart move by the FED because these represent many of the loans that are currently being refinanced and will provide a quick return on the investment by the FED.
This will help in the short term to possibly keep rates from rising but it is really doing very little to push rates lower than they are currently.
So When Are Rates Going to Drop to 4.5%?
Without a crystal ball or a good set of tarot cards, it is hard to say if the rates will ever get to 4.5%.
Almost every day there is some kind of financial report released that effects the pricing of mortgage backed securities.
If something significant happens to push rates down, we could see them go lower but the same applies in reverse and it is just as likely that a piece of data could cause rates to increase.
Float, Lock, Wait?? What Now?
My advice to all of my clients right now is this, If something makes sense, don’t hold off and wait for a rate that may never come.
If you have found the right home, for the right price, don’t let it go just because you want to have a 4.5% rate rather than a 4.875% rate. It is not worth the risk.
If you are thinking of refinancing, I am always available to you as a resource.
Let me analyze your options and I will fully explain the benefits to you. The difference between 4.875% and 4.5% on a $200,000 loan is less than $45 per month.
If we can save $150 per month in your mortgage payment right now, is it really worth waiting for a rate that may never come just to save an additional $45?
The media has been flooded with news of mortgage interest rates going to 4.5%.
I have had countless inquiries about this and wanted to send a little explanation of what really is happening in the world of rates.
First of all, interest rates HAVE improved significantly. Have we reached that magical 4.5% number everyone is talking about?
No, but top tier clients (740+ credit and 30% or more equity) are getting 4.875%.
The promise of 4.5% rates that we are all waiting for it needs to be examined in detail to fully understand why it is unlikely to happen solely based on the actions of the FED.
Didn’t the FED say they were going to lower rates to 4.5%?
The FED did not say that they would bring mortgage rates to 4.5%, in fact no one, not even the FED has the ability to set mortgage rates.
The FED simply said they would buy mortgage backed securities to help lower rates and keep them low.
The magical 4.5% number was simply an educated guess at the outcome of the actions of the FED.
This was a report that was flooded into homes across the country by the news media.
What IS the Fed Doing then?
The Fed Has been buying mortgage backed securities as they said they would.
However the ones they are buying are the 5.0% and 5.5% bonds which represent outstanding loans at 6-6.5%.
This is a smart move by the FED because these represent many of the loans that are currently being refinanced and will provide a quick return on the investment by the FED.
This will help in the short term to possibly keep rates from rising but it is really doing very little to push rates lower than they are currently.
So When Are Rates Going to Drop to 4.5%?
Without a crystal ball or a good set of tarot cards, it is hard to say if the rates will ever get to 4.5%.
Almost every day there is some kind of financial report released that effects the pricing of mortgage backed securities.
If something significant happens to push rates down, we could see them go lower but the same applies in reverse and it is just as likely that a piece of data could cause rates to increase.
Float, Lock, Wait?? What Now?
My advice to all of my clients right now is this, If something makes sense, don’t hold off and wait for a rate that may never come.
If you have found the right home, for the right price, don’t let it go just because you want to have a 4.5% rate rather than a 4.875% rate. It is not worth the risk.
If you are thinking of refinancing, I am always available to you as a resource.
Let me analyze your options and I will fully explain the benefits to you. The difference between 4.875% and 4.5% on a $200,000 loan is less than $45 per month.
If we can save $150 per month in your mortgage payment right now, is it really worth waiting for a rate that may never come just to save an additional $45?
Friday, February 6, 2009
Portland's Cycling Community
Anyone who lives in Portland has seen the steps that have been taken to accommodate the growing cycling community. The benefits of fewer cars on the road and to the environment are obvious. However, I am seeing some unintended side effects. First off, I am seeing tax payer dollars being diverted to more biking paths and things like 'Cycle Tracks'. If you don't know what a cycle track is, go to this story: http://www.katu.com/news/39220192.html. While I do think it's a good idea to keep cars and bikes separate, I wonder where the money for such ventures are coming from. In a rough economy, I know tax dollars and budgets are tight. Cyclists aren't paying a licensing fee or gas tax, so is it coming from the transportation budget or the general fund? I honestly don't have the answer. What I do know is this, either way, I think there should start to be some sort of licensing that goes along with cycling. It could be minimal, and even some sort of a sticker like they require for ATV's would be fine. Just make them offset a small portion of their own cost. Another huge problem I see is that cyclists only obey the rules of the road when it's convenient. They drive down the middle of the road like a car, but do not obey things like stop signs or red lights. This is a tremendous problem and is causing injuries and accidents that are unnecessary. If there was some sort of licensing it would be possible for police to write tickets for such violations. If you are going to be on a public thoroughfare, you should follow the rules of the road. If you are on a bike trail somewhere, then by all means do whatever you'd like. I would love to see Portland continue down the path of being bicycle friendly. It’s up to the individuals to make it a bicycle safe city. I see a big difference between bicycle safe and bicycle friendly. I’ll look forward to everyone doing their part to make Portland the most friendly AND safe bicycle town in the US.
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