Monday, December 30, 2013

Market Matters

White House Representative Speaks on Housing Finance Reform
Source: DSNews.com

Gene Sperling, director of the National Economic Council for the White House, recently discussed the president’s four major principles for housing finance reform at an industry symposium. Sperling emphasized maintaining widespread access to the 30-year, fixed-rate mortgage, and enhancing the role of private capital in the market.
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New home sales surge in October
Source: The LA Times
The Commerce Department is reporting that sales of newly built single-family houses rose 25.4 percent from September to a seasonally adjusted annual rate of 444,000. Sales are up 21.6 percent in comparison to October 2012.
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Mortgage loan quality improved in 2013 
Source: HousingWire
 
Home loan eligibility jumped to 96.44 percent in the first half of the year from 93.66 percent in 2012, according to a new report from compliance technology firm Quality Mortgage Services.
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FHFA: Conforming Loan Limits Remain Unchanged
Source: DSNews.com
The Federal Housing Finance Agency has announced that the 2014 maximum loan limit for mortgages acquired by Fannie Mae and Freddie Mac will remain at $417,000 for one-unit properties in most areas of the country. There is a cap of $625,500 in high-cost areas.
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Senate opens door for immediate housing finance reform
Source: The Hill
Due to the Senate’s elimination of the filibuster for presidential nominations, many experts believe Rep. Mel Watt (D-N.C.) finally will be as the next director of the Federal Housing Finance Agency, and with that change in leadership, there could be immediate major housing finance reform that provides greater access to the conventional housing finance market for a variety of buyers.
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Key U.S. housing markets challenged by lack of multifamily builds
Source: HousingWire
The latest building permit numbers indicate there were 387,000 authorizations for new multifamily units in October, which is an increase from the past two months. However, experts argue the number is too low and that equity financing for apartment projects is not growing.
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Southland home buyers shifting to condos as house prices rise
Source: The LA Times

Since home prices jumped in price this year, southern California home buyers purchased fewer single-family homes in October due to affordability concerns. However, since condos are an affordable path to homeownership in many urban areas, demand increased this year.
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Friday, December 27, 2013

Market Matters

Bidding Wars Wane in U.S. Housing Markets on Supply Rise
Source: Bloomberg 

Higher mortgage rates and an increase in values are reducing affordability, while also encouraging more sellers to list their properties. This could mean price growth will slow after the biggest increases since 2006. The government shutdown may have weakened confidence as well.
Read the full story

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Young American adults aren't moving as much as they once did
Source: The LA Times

The lingering effects of the recession are evident in statistics from the Census Bureau, as young adults are stuck in place due to an inability to obtain sufficient credit and income to move to a new home or apartment. The share of moves fell back to 11.7 percent this year.
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Down Payments Continue to Decline in Third Quarter
Source: DSNews.com
Lenders appear to have more confidence to lend with less cash down from qualified borrowers, as down payment percentages for 30-year, fixed rate purchase mortgages continue to decline. A new report reveals that the average down payment has dropped 2.74 percent since Q2 2013, according to a study released by LendingTree. As home values improve, the risk of borrowers defaulting on loans has decreased, so lenders have adjusted minimum requirements to attract borrowers.
Making sense of the story
  • The average down payment on a 30-year, fixed-rate mortgage loan in the third quarter of this year was 15.73 percent.
  • According to LendingTree, the national average loan amount for a mortgage loan originated in the third quarter was about $218,344.
  • New Jersey (18.8 percent), California (18.6 percent), New York (18.0 percent), D.C. (17.9 percent), and Massachusetts (17.5%) top the list with the highest average down payment percentages.
  • The lowest average down payment percentage in the third quarter took place in Nebraska, where down payments averaged 12.5 percent of loan values.
  • South Dakota (12.8 percent), Arkansas (12.9 percent), and Alabama (12.9 percent) followed Nebraska in the next lowest down payments. They all average under 13 percent for the quarter. Missouri filled the No. 5 spot with an average down payment of 13.1 percent.
  • D.C. ranked highest in loan amount with an average of $309,768 in the third quarter.

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Monday, December 23, 2013

NO FEDERAL DEBT RELIEF INCOME TAX FOR SHORT SALES

A short sale in California is generally not subject to federal income tax for mortgage debt forgiveness, according to a recent letter from the Internal Revenue Service (IRS). C.A.R. worked closely with Senator Barbara Boxer to obtain this IRS guidance. We are also hopeful that we can promptly obtain similar guidance regarding state income tax for mortgage debt relief income from the California Franchise Tax Board (FTB), which has been awaiting this IRS letter.

Given that a homeowner in California generally cannot be held personally liable for a short sale deficiency (see below), the IRS stated in its letter that it would consider the mortgage loan as a nonrecourse obligation that is not subject to federal debt relief income tax.  The amount of indebtedness, however, must be reported as the amount realized for capital gains purposes. Of course, a principal residence is generally excluded from capital gains tax up to $250,000 for single taxpayers and $500,000 for married couples filing joint returns (under 26 U.S.C. § 121).

As background, California law generally protects a borrower from owing a deficiency after a short sale of a residential property with one-to-four units, including both first and junior trust deeds (Cal. Code of Civ. Proc. section 580e). Exceptions include fraud, waste, cross-collateralized loan, and a borrower that is a corporation, LLC, or limited partnership. For more information, see C.A.R.’s legal article on Short Sale Deficiencies.

Although short sale sellers of a qualified principal residence are currently protected against federal debt relief income tax under the Mortgage Forgiveness Debt Relief Act of 2007, that federal law is set to expire on December 31, 2013, whereas the tax exemption set forth in the IRS letter has no expiration date. Similar protection to the federal Mortgage Forgiveness Debt Relief Act for state income tax under California law has already expired on December 31, 2012. However, other exemptions from federal and state taxation of debt relief income are available, such as for bankruptcies and insolvencies. REALTORS® should encourage their clients to seek the advice of a tax professional regarding the tax consequences of a short sale.
 

Monday, December 16, 2013

Market Matters

Refi Activity Runs Out of Steam
Source: The Wall Street Journal 

In comparison to last year, applications to refinance a mortgage have decreased by 57 percent. Since mortgage rates started rising last spring, refinance activity fell sharply, particularly in the second half of 2013.
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One Of Fed's First Quantitative Easers: 'I'm Sorry, America'
Source: NPR

Andrew Huszar, who oversaw the purchase of $1.25 trillion worth of mortgage bonds in a year, argues in an op-ed for the Wall Street Journal that the first round of quantitative easing did little to make credit any more accessible for the average American. Huszar calls the program the "greatest backdoor Wall Street bailout of all time.”
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Investors pitch to take over much of Fannie and Freddie 
Source: Financial Times
 
An investor group comprised of hedge funds and private equity companies will put forth a proposal to take over large parts of Fannie Mae and Freddie Mac. The investors want to restructure and reform these agencies using private capital, and they hold more than half the $34.6 billion of preferred shares in Fannie and Freddie.
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What buyers and sellers need to know about the end-of-year housing market
Source: The Washington Post

Dynamics of the real estate market are always changing, so understanding your housing and financial position, and where you stand in the buying/selling cycle, will allow you to make the best decisions.
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Why the Nation’s Housing Market Needs Mel Watt
Source: Center for American Progress
Rep. Mel Watt (D-NC) is President Barack Obama’s nominee to lead the Federal Housing Finance Agency (FHFA), but Senate Republicans recently blocked a vote to confirm Watt for the position. Two policy analysts argue what’s at stake if the Senate stalls on the vote and housing challenges linger.
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Housing market another battlefield for U.S. Vets
Source: The San Francisco Chronicle
New data reveals that our nation’s veterans face unique challenges when it comes to achieving homeownership. When members of our military leave active duty and return to the United States, in most cases they do not return to a home they own. In fact, only 18 percent of veterans return to a home they already own at the end of their service, and only one-third of military families report actually looking for a home within a year of return from active duty, according to the CENTURY 21 Harris poll.
Making sense of the story
  • As military service members return from duty and transition to civilian life, 93 percent of veterans indicate that homeownership is important to them.
  • The top road blocks for veterans are the price of homes (36 percent); an inability to come up with a down payment (31 percent); and personal savings (28 percent).
  • Physical or mental health problems create further disadvantages for veterans when it comes to finding employment and a home. It is projected that one in every four homeless persons in this country is a veteran. According to January 2012 figures, there were over 62,000 homeless veterans.
  • The unemployment rate among veterans is 16 percent, which is more than double the nation’s average unemployment rate.
  • Seventy-five percent say that owning a home is one of the most important things for a soldier returning home.
  • Among the reasons that becoming a homeowner is so significant to veterans are a desire to have their own residence (73 percent), to establish a household (43 percent), and to achieve financial security (36 percent). In addition, the majority of veterans (88 percent) indicated that owning a home makes them feel safer.
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Thursday, December 12, 2013

Home Prices Climb in 88 Percent of U.S. Cities

Source: Bloomberg

The NATIONAL ASSOCIATION OF REALTORS® is reporting that prices for single-family homes climbed in 88 percent of U.S. cities in the third quarter. There were double-digit increases in 33 percent of areas. The median transaction price rose from a year earlier in 144 of 163 metropolitan areas measured.
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Monday, December 9, 2013

Banks offering mortgages with only 5 percent down payments

Source: CNNMoney 

Banks like TD Bank, Bank of America, and Wells Fargo are now offering loans with down payments that are as low as 5 percent, which will help buyers who had trouble coming up with enough cash to make a 20 percent down payment. Rising home prices have led private lenders to loosen the purse strings. 
Read the full story

Monday, December 2, 2013

Credit unions say new rules will hurt lending

New federal mortgage rules are set to go into effect early next year, but the Credit Union National Association has warned that credit unions will be forced to discontinue, delay or reduce their mortgage loan product offerings because of the changes.
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