September, 2009

To increase interest, luxury second-home communities are offering “try-before-you-buy” weekends to potential customers, including the opportunity to play a round of golf, use the dining facilities and other amenities, so potential buyers can see if they’re interested in purchasing a property. USA Today reports that this is a great way to bring buyers and sellers together — but it’s not a free ride. The potential buyers have to pay several hundred dollars for their ‘inspection vacation’ and they also have to take a mandatory tour of the community.

And you might recall that a few weeks ago we had a very special guest on Real Estate Today – Ebby Halliday, who at 99, is the oldest practicing REALTOR® in the country. Well, to celebrate her birthday, Ebby decided to go back to school! The Dallas Morning News reports Halliday took a 15 hour real estate refresher course so the Texas Real Estate Commission would renew her license to sell. Halliday says the classes were helpful, and that she learned to take a digital picture while she was there. She also says she’ll have to take the course again next year, when she turns 100!

In the Northeast, the biggest sales surge over the past year, has been for homes in the $100,000 to $250,000 price range. When you compare July of this year to July of last year, that price point increased by more than 14%! There were also gains in properties just a bit more expensive, and just a bit less expensive. But, when you start talking about homes priced over a half million dollars, sales fell, this year compared to last.

In the Midwest, the hot sales price is $100,000 and below, indicating buyers are flocking to the bargains there. This price point accounted for more than 14% of the sales increase, followed closely by the $100,000 to $250,000 price point. Like the Northeast, though, higher priced properties experienced a sales dip.

Down South, the numbers showed a large increase in home sales priced below $100,000. From July to July, that price point increased nearly 38% in the region. Again, most properties priced much higher experienced a sales slowdown, except interestingly enough, the rate of sales in the $750,000 to $1-million range, which showed no change.

And out West, the region experienced a startling increase, when comparing sales in the price point of $100,000 and less. This July over last, sales were up 252%! This huge surge was due to first-time home buyers, repeat buyers, investors and people looking for second homes snapping up bargain after bargain. And like other regions, sales of higher priced properties dipped in the West.

So, as we’ve been saying for much of the year… sales are up! And a closer look reveals most of that increase, nationwide, is being led by the most affordable properties.

Back in May, the FHA approved what they call ‘the monetization’ of the tax credit, meaning that state housing finance agencies have permission to give you the money up front! It works like this:

Most of the states have come up with ingenious bridge-loan plans that advance buyers the cash they need for their closings. These are people who already meet the credit criteria for a mortgage; they just don’t have enough funds for a down payment. Usually the advances are in the form of a second mortgage, with or without interest. That second mortgage comes due and payable whenever the buyers get their credit back in the form of refunds from the IRS. And that’s good, because recent figures show that 70-80% of first time buyers need some sort of help with a down payment or closing costs.

So far, eleven states have jumped on the wagon to monetize the tax credit for those using FHA loans.

Missouri was the first state to try this out, all the way back in January. There, buyers can get a no-cost “tax-credit advance” of up to 6% of the home price. It’s in the form of an interest-free second lien that is repayable no later than June of 2010. If buyers can’t meet the deadline, the advance turns into a traditional second mortgage with a ten-year payback term, with a fixed interest rate at ½ a percentage point higher than their first loan.

Colorado started a similar plan, with Delaware, New Jersey, Tennessee, Idaho, Kentucky, Ohio, Pennsylvania and New Mexico and Virginia following suit with their own versions. Some of them have modest interest charges on the second mortgage from the beginning.

In Washington State, the Housing Finance Commission already runs a tax credit bridge loan program for buyers using its mortgages, but the state Treasurer James McIntire has said he would like to expand it.

Not all of the states are offering the full $8000, either. New Jersey only offers up to $5000, and $4000 if you’re married but filing separate income tax returns.

It’s also important to remember that every plan is different when it comes to who qualifies and how much they qualify for. Each plan has income requirements, some of which may be less than the federal guidelines allow for. In Missouri, you’re only eligible for assistance if your income is less than $79K a year.

So talk to your REALTOR®, because they are familiar with programs in your area. With deadline of November 30th quickly approaching, you’ll need to have a contract pending at the very latest by mid-to-late October if you want to close in time!

You can also check out the FHA’s website: www.fha.gov

It is not too late to get the tax credit, if you get to work right now. The credit expires November 30, but November 30 is not the date to sign on. One must be closed as of November 30 to take advantage of the $8000 credit. Remember, it takes 6 to 8 weeks to close on a normal real estate transaction, assuming there are no issues. Those who are not on a contract within the next 2 weeks, may not be able to close in time.

One thing a lot of buyers are doing in this market, is they find a house they like and then the wait to see if the price goes down. Then, wait another week to put pressure on the sellers. That may have worked in the spring and summer but it’s pretty dangerous to use those techniques at this point, with the deadline so close.

It’s the perfect storm for anyone looking to buy: not only is there the $8000 tax credit; but also incredibly affordable home prices; amazingly low interest rates and, in most markets, the inventory is still really good.

There may be a lot of sad people on December the 1st, after the deadline passes. But it remains to be seen — even without the $8000 tax credit — that with the availability of quality inventory, the lowest interest rates that we have seen in more than 40 years, it will still be an excellent time to buy.

There is much talk in the media, and much talk in congress, to extend that tax credit, not only beyond the November 30th date, but to all buyers. But, that’s a huge gamble that congress might act on that prior to that time.