Move-Up Tax Credit Not Having Much Affect

Unlike the $8000 First Time Home Buyer tax credit, the $6500 that move up buyers can receive is not making people buy. The reasons why current home owners are not making a move are simple: unemployment is high, consumer confidence is low, homes are not always worth what they were a few years ago when many people refinanced and borrowed against all the equity they had, which may be gone now, and $6500 is not necessarily enough to make people want to move. Unlike first time buyers, where there is a giant benefit of buying when the market is low, interest rates are low, and they can stop paying rent, move up buyers do not have the same motivation.

Entry Levels Homes Still Dominate Portland Market

In January of 2010 there were 1,010 homes sold. 552, or 55% of those were for under $250,000, which is considered the lower or entry level market. This trend has been progressing, and bumped up by the First Time Home Buyers $8000 tax credit. A year ago, January 2009 50% of homes sold were in that price range, and in January 2008 40% were sold for under $250,000. As the price ranges get higher the number of buyers gets small, showing that the move up and luxury markets are still struggling. For instance, on 23 homes priced $751,00 and up were sold last month, compared to January 2008, when 59 sold. 

5 Things You Can Learn About Credit From Gangster Movies

Have you seen those terrible blog posts about learning about money from the "Real Houswives" reality show? I may watch it, but I don't think I'll be taking any serious tips from them! I just ran across a way better, and by better I mean more interesting, GANGSTER MOVIES! I love it. Check out number 1 below, but be sure to click here to see the full list.

The World Is Yours… If You Don’t Get Cocky

“Say hello to my little friend.” ~ “Scarface”
Like the submachine gun Tony Montana wielded in “Scarface,” your credit cards are powerful. They can open doors, but they don’t make you invincible.
Denise Winston, money expert for Money Start Here, says, “Just because you own a gun doesn’t mean you know how to use it.” The same principle applies to credit cards. “Respect it, practice using it, clean it, and keep it in a safe place… maybe even under lock and key.”
Having credit cards can lure you into a false sense of security. The best financial protection is a good credit score, which can “dictate the quality of your life – where you live, what job you have, and what you drive,” says Winston.. “Managing and protecting your credit score can make deals happen and command respect.”

% of Short Sales in Portland Decreases

Short Sales are prevalent across the country, and can be a big issue when you are tying to buy a house. A short sale is when the house is listed for and worth less than the owner owes on the mortgage. Their lender, or lenders, have to approve the sale for less than is owed, and it can be a long and stressful process. Luckily, with home prices starting to stabilize, there are less short sales on the market now than in the spring of 2009. This week there are 13,058 active listings in the great Metro area, and 2,093 of them are short sales. That’s 16% (1 in 6 listings), which is better than May of 2009, when 18% were short sales.

What the IRS Needs from You to Get Your Tax Credit

The IRS just clarified which documentation taxpayers need to submit to claim the First-time and Move-up home buyer tax credit.


While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.


The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”


For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.

More Home Construction, Fewer Permits Pulled

New home construction starts rose higher than expected last month, while permits pulled for new home construction did not. What does this actually mean? Contractors and developers had permits from last year and they finally had the confidence to start construction. They did not need to pull new permits because they have existing ones that were sitting unused. This also means that while developers had the confidence to start projects that they had previously lined up, they did not see a big enough market to pull more permits. Since the first time and move-up buyer tax credits effectively expire at the end of April, contractors and developers are not seeing a big enough market to buy expensive permits at this time. If the economy continues to chug along, they might pull permits and start jobs only for signed buyers, and not build model homes and on speculation for a few years. This will be a positive, if conservative, move for the new home market.
Read more here.

Median Sale Prices for PDX Areas

It's my favorite topic! The monthly Market Action Report is out from RM:LS, and the median sale prices for each Portland area and suburbs are my favorite section.

North Portland: $212,500
NE Portland: $242,500
SE Portland: $192,500
West Portland: $310,000
Beaverton/Aloha: $225,900
Hillsboro/Forest Grove: $220,000
Tigard/Tualatin/Sherwood/Wilsonville: $287,000
Lake Oswego/West Lynn: $355,000
Oregon City/Canby/Molalla/Beavercreek: $215,800
Milwaukie/Gladsone/Boring/Clackamas/Estacada: $249,000
Gresham/Troutdale/Sandy/Corbett/Fairview: $199,000

The cheapest area: SE Portland, and the most expensive: Lake Oswego and West Lynn. No surprises.

Avoid Buying Panic

We have all had buyers remorse and made purchases at the last second, neither of which are a fun experience. To avoid a bad home buying experience, follow these guidelines:

1. Search for a real estate professional who has experience and knowledge with the location and property type you value.
2. Keep asking "why?" Challenge your thinking and assumptions, and those of the professionals you work with.
3. Get to know the neighborhood(s) you want to live in, so you can evaluate which streets carry the highest property values and the greatest potential for value growth. Within each neighborhood, there is a gradient of values. When abutting areas are of higher value, streets closer to this "better" neighborhood will carry higher values. The opposite is true for adjacent lesser areas.
4. Seek out a knowledgeable, reliable home inspector who can address quality of construction and property devaluators, such as out-dated electrical systems like knob and tube and aluminum wiring, and dangerous insulation like urea formaldehyde and Zonolite. Learn as much as you can about cost-to-correct for worn-out roofs, sagging eavestroughs and other standard home repair projects. This will allow you to estimate expenses over the first year or so of ownership. Your chosen real estate professional can also project potential maintenance and repair costs to enable you to accurately budget your purchase for sustainability.
5. Pre-qualify with a mortgage broker who can provide access to funds beyond traditional lenders. Mortgage brokers can usually arrange better mortgage terms with traditional lenders than an individual buyer can, but these brokers may also have private and less-traditional sources of funding. Their lending criteria may not be as rigid and their scope of properties greater.
6. Know what you "need" and what you "want" and how you'll prioritize the items on these two lists. Buying real estate is all about compromise. Doing this under pressure can be difficult. Taking the time to make these decisions beforehand can pay off.

Where are the Move Up Buyers?

Move-up buyers are not taking the market back from first timers, like many predicted when the move-up buyer tax credit was introduced. Traditionally move-up buyers make up about 60% of the market, but in 2009 they only accounted for 53%. The problem isn't people not wanting to move now, it's finding a buyer for their current home. Without selling what they own now, the majority of move-up buyers cannot afford to buy a new house. For the last year the real estate industry has focused on first time buyers, highly publicizing the $8000 tax credit. Those ready to sell their current home have not been focused on, and that leaves large gaps in knowledge for move-up buyers. For instance, many do not know that they have to have owned their current home for 5 years, but can move to any new house, it does not have to be more expensive than their current home. Also, the new deadlines have not been clearly communicated to the public. Buyers need to have an accepted offer on a home by April 30th, 2010, and it needs to close by June 30th, 2010. So, for a move-up buyer this window from the middle of February to the end of April is small, but it can be done. Set your home at the right price, be flexible with the buyer's needs, and be realistic about what you can afford to move up to.
Read more about move-up buyers here.   

Winter to Spring Home Maintenance

 Basic maintenance done at the right times of year will make your home more comfortable, make repairs easier, and save you money in the long run. As winter turns to spring, hopefully, here are some things to put on the list:
Winter

• Check your furnace filter once a month during the heating season for excess dust; you'll want to change it once or twice a year so the unit operates more efficiently. Cost: $8 to $20 each.

• Make sure your sump pump is clean and operating properly before spring rains arrive. Lift the lever on the sump to make the float go up and wait for the motor to click on. If you have a battery backup, unplug the unit and test the pump again.

• Vacuum the refrigerator condenser coils -- usually located on the bottom or on the back of the fridge. (Unplug it first, then use your vacuum's brush attachment.)

• Use your stuck-indoors time to knock off some annual fire prevention tasks. First, make sure your fire extinguishers haven't passed their expiration date. Next, replace ground fault outlet circuit interrupters that aren't working properly (when you hit the "Test" button the "Reset" should pop out; if it doesn't, you can buy a new one at a hardware store). Cost: less than $20 for a fire extinguisher and $10 to $12 for a circuit interrupter.

• You need to change batteries ($6 for two nine-volt ones) in smoke detectors and carbon-monoxide alarms twice a year. An easy way to remember: Make the first switch on the same day you reset clocks to daylight saving time (March 14 this year), and again in mid-October. At the same time, test your smoke detectors; use a smoke-in-a-can product ($9) or blow out a candle underneath them.

Spring

• Schedule an inspection and cleaning of your chimney once the heating season ends; that's when many sweeps offer a discount. Also make sure to remove fireplace ashes to prevent moisture buildup, which can damage masonry. Cost: $100 to $300, depending on the layout of your chimney.

• Inspect your home's exterior for loose siding or trim, cracks, and crumbling mortar caused by harsh winter weather, and examine your attic for any signs of leaks. If you've got siding, give it a wash using a garden hose and a solution of a third of a cup of laundry detergent per gallon of hot water. Work from the bottom up with a soft nylon brush (top down can cause stains).

• Wash and treat (or paint) wood decks to prevent cracking before barbecue season arrives. Cost: about $50 to $75 for five gallons of sealer.

• Make an appointment to get your air-conditioning system professionally inspected and adjusted before the temperature hits 80°. Cost: $75 to $175 per year for an HVAC service contract.

• Before watering season, check pop-up sprinkler systems for leaks or clogs and be sure the spray isn't going where it shouldn't. 

Read about what you should do the rest of the year here.

10 Millions Solar Roofs? And the Gov't Will Pay for Half?

Senator Bernie Sanders (I-VT) introduced a great new bill to Congress yesterday which would create incentives and tax rebates for solar roofs and solar water heaters. The bill aims to get 10 million solar roofs and 200,000 solar heaters up and running--producing a total of 30,000 megawatts--over the next 10 years.

Here's the gist of the bill:

the "10 Million Solar Roofs & 10 Million Gallons of Solar Hot Water Act" ... would provide rebates that cover up to half the cost of new systems, along the lines of incentive programs in California and New Jersey (not coincidentally, Nos. 1 and 2 in installed solar in the U.S.). It also includes measures to insure that those who receive assistance get information on how to make their buildings more energy efficient.

Such a generous tax break would make distributed solar extremely attractive, especially considering that the price of photovoltaic cells keeps on dropping. Additional benefits include the fact that distributed solar--like solar roof--projects can be easily linked to the grid, and can create jobs swiftly, thanks to the fact that there are relatively few assessment hurdles to be jumped.
Below is an excerpt from an interview Sen. Sanders gave:
On what the bill would cost:
Bernie Sanders: "We think this will cost between 2 and 3 billion dollars a year, and at the end of a 10-year period we are going to be producing 30,000 new megawatts of energy--the equivalent of what 30 nuclear power plants produce. This is a very cost effective way of producing that energy.
On the mechanics of the bill:
"Remember that there are already a lot of tax credits, federal and in many states. The federal tax credit would be up to 30 percent off the cost of a project. That's a lot. Let's say hypothetically you wanted to spend $40,000 on solar. If you take 30 percent off that, you're down to $28,000. If you get state help you're down to $25,000. Then the federal government would pay half of that.
"That's a pretty good deal! It could be a major incentive for people to use photovoltaics. And the more photovoltaics we use, the more will be built; the more that are built, the cheaper it becomes."

To read more, click here.

Predictions for the Next Decade in Real Estate

The major news and opinion sites for real estate are making predictions for the next year, and the next decade. One of the shortest, and most interesting come from Inman.com, and news site for Realtors. They summarized a report from John McIlwain, a senior resident as the Urban Land Institute. McIlwain predicts that over the next 10 years home price appreciation will be between 1-2% each year, once the market recovers. Home ownership will drop from 67% to 62%. Also:

• Older baby boomers to move to urban, mixed-use, mixed-age centers near family instead of retiring to Sun Belt communities;
• Immigrants to snub the suburbs in favor of more close-knit communities;
• Younger boomers to face the challenges of lost home equity and a smaller pool of move-up buyers;
• Generation Y to rent for long periods by choice or because they are paying off student loans or have stagnant incomes. 

It is good news for homeowners for prices to slowly, but steadily rise, not shoot up in a year, only to drop back down just as quickly. 

Pre-Listing Home Inspections

One of the things that Realtors, including myself, recommend to sellers is to have a home inspection prior to putting their home on the market. While this does cost a few hundred dollars, it has several benefits.

1) You decrease the likelihood of liability for undisclosed defects that might be discovered after the close of escrow.
2) You demonstrate an uncompromised willingness to disclose everything about the property.
3) You provide the basis for an as-is sale by disclosing all known defects at the outset of the transaction.
4) You avoid the need to renegotiate the terms of the deal after the buyers hire their own inspector.
5) You have the opportunity to know the issues, and have them fixed without being in a time crunch.

While many sellers balk at the idea of paying an extra fee upfront, it can save money in the long run. There is time to negotiate with contractors and find the best bid, and if the repairs are significant, the listed price might even be higher than you and your Realtor originally thought.

Bank of America Wants to PREVENT Foreclosures

The largest mortgage lender in the country announced last week that it is willing to lower or eliminate payments on second mortgages. This is great news for all homeowners that got sucked in 0% down mortgages, where they took out two separate loans, on for the down payment and one for the balance of the purchase price. One of the biggest issues in real estate right now is short sales, and often the sellers have a second mortgage. The holder of the second mortgage often wants to be fully paid, and can block a sale if they don't agree to the terms. For such a large lender as BofA to announce that it sees the issue, and is willing to change there policy is a large step forward. Now we just have to wait and see if this will speed up short sales, or prevent foreclosures.
Read more here.