Buyer’s Choice Realty blog

12 Top Spots to live in the Greater Boston area.
 

This year’s Globe Magazine’s “Top Spots to Live” are all places that didn’t fare too badly during the economic downturn. Some even gained value during the five years.
 

The top 12 are Wenham, Jamaica Plain, Cambridge, Winchester, Rowley, Lynnfield, Natick, Downtown Boston, Weston, Brookline, West Tisbury on Martha’s Vineyard and Eastham on Cape Cod.
 

The selection came out of data from the Warren Group tracking single family median prices for 2005 and 2009.  The market peaked in 2005 and has gone steadily down through 2009. Median values for single family homes in our state have come down an average of 20% over the five year period.
 

As an aside, Buyer’s Choice Realty is located in the top choice town with our corporate office at 162 Main Street, Wenham. Two of our Exclusive Buyer’s Agents, Melissa Addis and Lorna Zizza, live in Wenham.
 

For more information on the why and how of the Globe’s Top 12 picks see Elizabeth Gehrman’s article on Boston.com.
 

Do you think this is an accurate picture of values in these towns? What does the median price comparison in 2005 and then in 2009 tell us? Is the real estate market any better today in March of 2010? We welcome your thoughts. Call or email us for more data and learn why despite climbing interest rates, this is a good time to buy.

The U.S. Department of Housing and Urban Development recently announced that eligible borrowers who intend to purchase an FHA-insured home may elect to ‘monetize’ the first-time homebuyer tax credit and apply those funds toward their down payment or closing costs. Previously, buyers could only receive the credit (up to $8000) by amending their 2008 income tax return or waiting until they file their 2009 return.

Read more about this new program:

HUD news release (opens as a Word document)

IRS tax credit answers

Hud Secretary’s announcement of new plan

Here are a few of the rules involved (per HUD’s letter) in order to be able to use this credit before you actually purchase your home:

• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.
• The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.
• Secondary financing may be “soft” (silent) or require a monthly repayment.
• If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
• If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a “soft” second.
• The secondary financing may not require a balloon payment before ten years.

So, you have 3.5% of the purchase price saved up to use as your down payment on your FHA loan and you want to use the tax credit you qualify for in order to not have to pay closing costs out-of-pocket. What’s the next step? Get your lender to participate in this program. However, most, if not all, lenders are not participating.

You will have a hard time actually using this new program and getting your tax credit up front. As of today, it is near impossible. Why? Lenders want to be able to have borrowers sign a document that would allow the credit to be disbursed directly to the lender when the borrower files their 2009 income taxes, but they are not allowed to do this because the government feels it would not protect the consumer.

As a result, lenders have little to no protection or guarantee that the borrower will send the credit to them next year and have no desire to have these short-term loans convert to secondary liens on homes. If this does not change, it will be yet another example of good idea, bad implementation.

*The above material should be used for information only. Please consult your lender and tax professional with any questions. Maybe your lender will allow you to do this. If so, please share your success with me. And, if you are looking to cash in on the tax credit in Massachusetts, let me know and I will provide you with all the information you need. At Buyer’s Choice Realty, we only work for buyers and have saved thousands of buyers millions of dollars.

Kathleen M. Howley wrote an interesting article recently. Check it out on Bloomberg.com. Howley’s thesis, built in large part upon interviews with Nobel laureate economist Joseph Stiglitz and co-creator of the widely used Case-Shiller housing index Robert Shiller, submits that speculators are largely to blame for the current housing recession and these same flippers/professional investors will keep prices down for some time to come.

How did this happen? Flippers bought more than they could afford thanks to no-documentation loans and other risky mortgage products during the housing market bubble in the late 1990s and early 2000s. When many of these loans ultimately went into default and the homes were foreclosed on, the bubble burst. This has been happening for four years now, and prices are still rapidly dropping.

These same speculators have been buying up foreclosures at auction and directly from lenders, which has prevented the housing market from collapsing completely, but Professor Stiglitz contends that speculators may cause a double housing recession. He said, “We’re creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve.”

The problem is huge, and banks (who own at least $11.5 billion of homes, according to the FDIC) also continue to contribute to it. How do you feel about banks, Professor Stiglitz? “…the same banks that created the problems by mismanaging their risk are mismanaging the disposal of their assets.”

There is no easy solution to this murky issue, but states will soon receive money allocated from the Housing and Economic Recovery Act of 2008 to purchase & renovate foreclosed homes, then sell them to families who intend to occupy the homes. States have 18 months to use their money or they will lose it. Hopefully this program will be run well by states and community groups so that potential buyers, mostly low-income, can occupy their own home, which will improve communities and settle the housing market. I have seen no indication that this money has been sent to states yet, but it is likely to be soon. Florida, Nevada, California, and Michigan, those most widely affected by foreclosure, need to act quickly and rationally.

What’s your view? We would love to hear from you. Call 800.25.BUYER (ask for John) or email me.

For an interesting read and one broker’s opinion about home buyers this year, head over to REALTYTIMES®. Author Mark Nash, a real estate practitioner in the Chicago area, has done a concise job summarizing what is in and out for home buyers. According to his bio on the site, Nash has been doing his year-end “What’s in, what’s out for homebuyers” series for some years and has been featured on television and in print.

One of the ‘what’s in’ headlines surprises me and I’m not entirely confident it applies to the majority of real estate agents. The headline: Real estate agents as a housing resource, not a salesperson. While we at Buyer’s Choice Realty act as consultants to our clients, there is still evidence that the vast majority of agents care much more about getting sales than helping people, providing them with solid information, and educating them realistically, especially when such information may cause a prospective purchaser to hold off on buying a piece of property.

I hope this trend is changing, because consumers have the right to be educated about purchasing real estate, and need to know that it may not be right for them at this time based on their income, job safety, budgeting, etc.

If you are thinking about purchasing real estate in Massachusetts in 2009, call or email me to discuss your particular situation. Everything you tell me will be kept confidential, and since I only work to help home buyers, you can be sure you have my undivided loyalty. For a no-pressure situation and objective information, contact Buyer’s Choice Realty. Our past and present clients will attest that we have your best interests in mind.

800.25.BUYER (ask for John)

The National Association of Realtors® reported today that their forward-looking statistic, “Pending Home Sales Index“, based on contracts signed on previously owned homes, is down nationwide. With the economy going down the drain, huge job losses in many sectors, and consumer confidence very low, this number is no surprise.

Here in the Northeast, the numbers are the worst. The index dropped 7.2 percent to 63.2 in November and is 14.6 percent below a year ago.

Is there light at the end of the tunnel? Perhaps. The NAR’s “housing affordability index”, a complicated relationship between prices, mortgage rates, and family income, is approaching record highs not seen since 1972. Housing is actually becoming affordable again.

Real estate prices in Massachusetts show few, if any, signs of increasing for the moment. That could change by the end of this year if soon-to-be President Obama and his team roll out an effective stimulus package that focuses on housing. Financing a home purchase is as cheap as it was in the 1950s & early 60s thanks to the Federal Reserve, but if foreclosure numbers do not decrease soon, prices will continue to fall.

Is now the right time to purchase real estate in Massachusetts? For a free consultation to discuss your particular situation and goals (and to answer any and all questions you may have about the home buying process), call me at 800.25.BUYER (ask for John) or email me.

Now that the holidays are over and we are into a new year, let’s take a break and look back on 2008. Assisting us today will be Stefan Swanepoel, a noted author and speaker who has been right on with his prognostications regarding real estate and the direction the industry will take.

Mr. Swanepoel (aka ‘Mr. Internet’) has not released his full annual report for this past year but he did share some of the high points in a ‘Top Ten’ list. What impacted the industry in 2008?

1. Emergency Economic Stabilization Act of 2008 (The Bailout)
2. The Presidential Election
3. In Memory Of: Countrywide, IndyMac, Washington Mutual, Wachovia, etc.
4. Facing Foreclosure Frenzy
5. Home Prices Spiral Downward
6. NAR-DOJ IDX Settlement
7. Brokers Go Bust
8. Keeping It Short (Twitter)
9. ActiveRain Explodes Past 100,000 Members
10. NAR Celebrates 100 Years

There are quite a few conversation starters in this list, and 2008, a year filled with volatility, disappointment, more than a few bankruptcies large and small, is one for the history books. I’m sure more than one of you are glad to see 2009 although many challenges face the industry that will take time to work their way through.

To chat about any of these headlines or to figure out how they may affect your prospects for purchasing a home in eastern Massachusetts this year (i.e. How can I buy a foreclosure?), please do not hesitate to call me toll-free at 800.25.BUYER (252.8937 - ask for John) or email me. Home prices are low and heading lower, so don’t miss out on a great deal in 2009!