2009: Mixed Emotions

It's been a while since I've updated this blog. I'd like to say it's because I've been so darned busy selling homes that I just haven't had the time. And while I was quite busy for several months (I had 5 closings in April alone! and I moved in September), that really wasn't the reason for my blogging absence.

I've had a hard time defining my purpose here. Do I want to locate and provide information for my clients to help them understand the inner workings of the buying and selling process? Do I want to keep my readers up on the ever-changing market conditions, the ebbing and flowing of this crazy business? Or is it my goal to share my impressions and experiences with you so that you can get to know me better before you call on me to assist you? Maybe you're already working with me and just want to see what I'm writing about today -- is that what I'm trying to focus on? I'm leaning towards -- yes, yes, yes and yes.

I've seen some blogs that are too informal, too casual and chatty; and while I can see some value in that, it's important to me to be as professional as I can be, since I take my career very seriously. On the other hand, I really really like what I do; and I think that's really important to share, as well.

So you see my dilemma.

I titled this posting, "Mixed Emotions" for several reasons, some of which are now clear. But I also have those feelings because -- despite the crappy market conditions -- I've been blessed with the opportunity to work with some wonderful people this year and make a little money along the way.

This year hasn't been good a lot of Realtors ®. Many other professions are suffering, as well. But better times are ahead.

I'll be devoting more time here in the future. I'll try to keep a balance of informative postings with occasional narratives on something that happened to me that I simply wanted to tell you about. Let me know what you think.

This piece ran in today's (Dec. 10) St. Louis Post-Dispatch. Don't let the headline fool you; this is good news.

Home Values Decline

By Tim Logan

ST. LOUIS POST-DISPATCH

Thursday, Dec. 10 2009

The average St. Louis-area home lost 4.3 percent of its value in the past year,
but those losses are stabilizing.

So says Zillow, a Seattle-based real estate firm that sifts a wide range of
data to estimate the value of every house in many major real estate markets.
Its average estimate for metropolitan St. Louis in November was $141,100.
That's down half a percentage point from October, and 9.3 percent off its peak
of $155,600 in the first quarter of 2007.

But the good news, Zillow says, is that value declines are stabilizing. Some
parts of the country — markets such as Boston, Atlanta and Denver — have seen
their overall values increase in 2009. And losses in St. Louis were much less
sharp in 2009 than they were in 2008.

As for 2010, the group's chief economist was wary. He predicted that the
eventual end of the $8,000 tax credit for first-time buyers and the inevitable
rise in interest rates will create headwinds for housing next year. How strong
those winds blow remains to be seen.

100% Mortgage Loans are Still Available

The caveat is that these loans are only for homes in rural areas or in smallish communities. Below is an article from the St. Louis Post-Dispatch:

By Tim Bryant

ST. LOUIS POST-DISPATCH

Sunday, Feb. 22 2009

Amid the wreckage of the mortgage business nationwide, there's still a way to get a low-interest, government-backed home loan without putting up a penny for a down payment.

The catch, if it can be called that, is the borrower's new home must be in a rural area or a town of 20,000 or fewer people. But those towns may be in the suburbs, too, meaning that parts of the St. Louis region would qualify.

The consumer-friendly financing is offered by the U.S. Department of Agriculture's Rural Development program, which was established in 1991 to keep rural areas and small towns from emptying. The goal remains, but people shut out by the rest of the home-loan industry are finding their way to the USDA's program as a way to buy a house with nothing down.

Last year, the number of applicants nationwide reached 62,933, nearly double the previous year. While many of the program's 265,000 borrowers are in the Midwest, it backs $24 billion in home loans across the country as well as in Puerto Rico and U.S. possessions in the western Pacific.

"Basically, we became the only game in town in rural areas," said Randy Griffith, who runs the Missouri loan program from his USDA office in Columbia. "We're really having a run. One of the factors in rural areas is the affordable housing availability."

The program has become so popular that its funding of $6.9 billion last year has run out. For now, a congressional resolution is allowing the USDA to make "conditional" loan commitments, said Joaquin Tremols, the program's acting director.

Whether the financial stimulus package signed last week by President Barack Obama will provide more money for the program remains unclear. Tremols said he was waiting to hear how stimulus funds will be distributed. He touts the program's advantages:

— Private lenders approved by the government issue fixed-rate 30-year mortgages. No subprime, adjustable rate funny business here.

— Families may borrow 100 percent of a new or existing home's value, including mortgage closing costs.

— Earnings guidelines apply, but applicants may borrow up to 115 percent of the median household income in the county of their desired home. In most of Missouri and Illinois, a family of four with an adjusted annual income of up to $70,750 may qualify.

The program's foreclosure rate in Missouri is 1.38 percent, which is slightly below the state's overall rate, Tremols said. All of Missouri outside the immediate St. Louis, Kansas City and Springfield areas, plus a few smaller cities, is covered by the loan program. In the St. Louis area, part of St. Charles County and much of Jefferson County and the Metro East are eligible.

"There is a lot of rural area" in the United States, Tremols noted.

That includes Marthasville, where Julie Frankenberg and her fiancé, Mike Brinker, are getting a $125,000 slice of the USDA pie. For now, they are living separately with their parents, in Washington, Mo. But they are scheduled to close March 5 on a three-bedroom, two-bath house with a two-car garage in
Marthasville, across the Missouri River from Washington.

Frankenberg, 23, said she is thrilled to be able to buy a house. "It has a big, beautiful back yard with a fence," she said.

The couple got a 4.25 percent interest rate mortgage and a good price on the one-year-old home because a job relocation forced the previous owner to sell. "We actually got a heck of a deal on it," Frankenberg said.

The couple's banker, Sherry Wahle of the Bank of Washington, said the USDA program is "the only 100 percent financing product left on the market." Bank of Washington has made most of its USDA-backed loans in Franklin and Warren counties, Wahle added.

"People get a little concerned when they hear rural development," she said. "They think country."

But when other mortgage sources vanished as the lending market crashed, more prospective home-buyers turned to the USDA to see if they were eligible. Last year, the rural program guaranteed $277 million in home loans to 3,000 Missouri households — up $80 million from the previous year. Applicants go through a normal verification process, Griffith said, and they can qualify for a loan with what the USDA refers to as a "reasonable" credit history.

Brinker, 21, and Frankenberg were looking at houses when a real estate agent told them about the USDA program. They jumped at the chance to buy a house without having to come up with a down payment.

Frankenberg said she and Brinker are eagerly anticipating moving to their new home next month and getting married in October.

"We're just really excited," she said. "We're shopping for furniture now."

tbryant@post-dispatch.com | 314-340-8206

Understanding the Real Estate Stimulus

I know. I do know.

It can be confusing, wading through all of the newspaper articles about all of the elements of this new stimulus package. But the St. Louis Post-Dispatch published a piece yesterday (2/20) that summarized the 4 main points that will affect both home sellers and buyers. I'm pasting it below (this actually originated as a blog post, and I've included a link to that blog at the end of the article).

I hope this helps you and motivates you to take advantage of the tax credit and historically low mortgage rates. I'll be shocked (and thrilled!) if they get much lower.

Homes may not be selling for what they sold for a few years ago, but -- if you're looking to sell your current home and get into a different one -- you'll get a good price AND an exceptional interest rate. And that's a good thing.

According to Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers, “There are four primary sections of the economic stimulus plan that will benefit home owners and buyers."

Benefit #1 - Expansion of Home Improvement Tax Credit

“The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1500,” Nicholas said. “This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns.” Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters. “Generally, most modern improvements like windows, furnaces, and air conditioners meet the necessary standards for energy efficiency,” Nicholas said. “If you’ve been holding off on making some of these improvements, now is a great time to get a move on it - especially with all the great deals being offered.”

Benefit #2 - Expansion of First-time Home Buyer Tax Credit

The tax credit available to first time home buyers was increased from $7,500 to $8,000 for homes purchased between January 1, 2009, and December 1, 2009. Also, the credit no longer needs to be paid back as long as the buyers live in the home without selling it for at least 3 years. “The previous version of the credit expired on July 1, 2009, and required home buyers to pay the funds back over a 15 year time frame,” Nicholas said.

The income limitations remain the same ($75,000 for single tax payers claiming the full credit and $150,000 for married tax payers), as do most other qualification requirements. Also, the credit remains refundable. “This means that first-time home buyers who owe less than $8,000 in taxes for the year are still eligible for the full $8,000 credit when they file their tax returns, and the IRS will write them a check for the difference between $8,000 and their actual tax bill,” Nicholas said. “In fact, the credit can be claimed on your 2008 tax returns that you file by April 15 of this year, even if you buy the home in 2009.”

There is one catch, however: if you bought the home in 2008, the credit remains $7,500, and it still needs to be paid back over a 15 year time frame beginning in 2011 when you file your 2010 returns.

Benefit #3 - Higher Reverse Mortgage Loan Limits

The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country - not just the higher cost areas. The previous limit was $417,000 across the country. “This is especially important because the FHA program is virtually the only game in town as private and jumbo reverse mortgage programs have nearly all evaporated,” Nicholas said.

This coincides with another little-known change in the reverse mortgage arena: the availability of reverse mortgages on home purchase transactions. “This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell,” Nicholas said. “Seniors could also use this strategy to buy a new home and turn the old home into a rental or otherwise wait for market conditions to improve before trying to sell the old home.”

Benefit #4 - $729,750 FHA and Conforming Loan Limits Restored in High Cost Areas

“The $729,750 maximum loan limit had been in force throughout 2008, but was reduced to $625,500 in 2009,” Nicholas said. “The economic stimulus plan restores the $729,750 maximum. This makes higher cost homes more affordable - especially in the coastal housing markets that tend to have higher than average home values.”

For related information on how US debt levels are affected by the latest stimulus plan, please visit Gibran Nicholas’ blog at http://gibrannicholas.com.

A bit more detail ...

For additional clarity on the new tax credit, here are some side-by-side comparisons that will spotlight the changes from the previous one. CLICK ON THE CHART TO THE LEFT TO SEE IT FULL-SCREEN.

Finally -- Something to Celebrate!

On Friday the 13th, the U.S. Senate finally passed Pres. Obama's American Recovery and Reinvestment Act of 2009, with $787 billion in funding to stimulate our economic recovery.

Included in this package is $6.6 billion to fund a first-time home buyer tax credit aimed at jump-starting home sales. This program expands and alters the previous $7,500 offering for some first-timers (there are income limits), but this new one does not have to be repaid; and it gives buyers a gift of up to $8,000, or 10 percent of the sales price, whichever is less.

The program is available to qualified buyers through Dec. 1, 2009.

While we didn't get the $15,000 credit we had hoped for, this is good news. Virtually all lenders and buyers I've spoken to recently have expressed relief that Congress recognizes the need for such an incentive and has moved to alleviate the housing slump, which has affected so many other areas of economy.

No doubt many home shoppers who have been on the fence about moving ahead towards the purchase of a home can now take advantage of this tax credit which will make the home buying process more rewarding than usual.

If you are one of those lookers who is now ready to jump into the market, contact your lender for more details.

In these gray days of late winter, I am so glad to be able to share this good news. Not even a trip to St. Thomas can beat this!

Good news for these communities

An interesting article:

America's Fastest-Growing Towns
In the last decade, there have been hundreds of communities in every state that have seen significant growth in new homes.

Many of them are outside the urban core and often far from established centers of employment. In a new report, BusinessWeek poses the question: Will the current economic slowdown put an end to these communities?

"The boomtowns of this decade are not booming so much in the last couple years," said William H. Frey, a demographer at the Brookings Institution in Washington, D.C., tells the magazine. "It's possible those places will come back again. A lot depends on where the economy grows and where the new knowledge centers are."

BusinessWeek worked with Gadberry Group, a business location company, to identify communities in every state that have experienced the largest growth. The results were published in a report called "America's Biggest Boomtowns."

The top 10 fastest-growing communities:

1. Summerlin South, Nev., 618 percent
2. Katy, Texas, 168 percent
3. Wentzville, Mo., 160 percent
4. Spring Hill, Tenn., 157 percent
5. South Carolina, 156 percent
6. Brighton, Colo., 153 percent
7. Wesley Chapel, Fla., 151 percent
8. Lehi, Utah, 110 percent
9. Canton, Ga., 99 percent
10. Oswego, Ill., 98 percent

Source: Business Week, Prashant Gopal (02/06/2009)