May Flowers...and Real Estate Sales

As we head into the heart of this year’s spring season, I thought it would be helpful to share what we are seeing from a national perspective in the housing market and point out a few reasons for optimism in the months ahead.
Bruce Zipf, president and CEO of NRT, our national parent company, said this week that our overall business results have managed to exceed expectations, thanks in large part to a surprisingly resilient high-end market, especially here in the Bay Area.
Normally, we judge the strength of the housing market by looking at current sales volume against the same time last year to gain a sense of how things are improving. But we couldn't properly compare data from this March and April due to the artificial stimulus effects of last year's Home Buyer Tax Credit. In May, these effects should lessen and give us our first true glimpse of the market's strength, if we continue to see improvement in our market as we head into the heart of the spring buying season.
Our Cupertino office is seeing growing momentum from buyers looking to take advantage of mortgage rates while they’re still low, as well as prices that remain affordable. In fact, we continue to have more qualified buyers than listings. This is resulting in multiple offers for many attractive homes. Buyers are coming in with a lot of cash or all cash to win out the competition. Because obtaining loans and appraisals is on ongoing problem, these all-cash offers usually take priority. We are back to having the majority of our sales involve multiple offers. A very original fixer-upper was listed for $988k, got 11 offers, and was bid up about $100K
This is not to say that every market around the Bay is experiencing the same strong buyer demand. Certainly a number of communities have more balanced markets, and some homes continue to sit while others sell briskly. But in general, we’re seeing well-presented, well-priced homes selling much better today than they did a couple of years ago.
Another reason for optimism is that mortgage rates are likely to remain affordable for some time to come. I know a lot of market-watchers were concerned that the Fed could raise interest rates soon in response to inflation fears and the end of the government’s bond-buying program. But Fed Chairman Ben Bernanke largely put those fears to rest in his press conference this week.
So as we look to May and the upcoming summer season, there are many reasons to be encouraged that our housing recovery will continue to gain traction – especially here in the Bay Area.

Why I'm Still Selling Real Estate

Mostly because I love it....and also because it can be so satisfying.
A while back, I wrote about handling a home sale where the appraisal came in very low and all parties had to work together to facilitate a close of escrow.
This email just arrived in my box:

Bobbie, sorry it took so long to get back to you. Jan and I want to thank you for all of your help in the selling of our home. It was a complicated, emotional and difficult situation to deal with and you handled it very professionally. Without your help we would not have gotten our price. Coldwell Banker should be very proud of you, I know I am. Thanks again for everything. You made the impossible possible.
Jan and I love it up here at Sun City Lincoln Hills and we have a guest bedroom just waiting for you to enjoy it. So.....come on down! I should say up.
Best personal regards,
Richard Martinez
Jan Martinez

The best endings are happy ones.

Finally, A new Season

Officially, Spring began on March 20th, but the headlines in today's Mercury News heralded the true start of the season for Realtors. Home sales in March were the highest in four years in Santa Clara County...not quite at their all-time high, but moving up, especially in the high end of the market. Last year, people in the business mourned the end of the first-time buyer tax credit, but that loss doesn't seem to have effected our local area at all.
Inventory, which has been extremely low, is finally starting to rise, although Sunnyvale sales are brisk, and we're still seeing multiple offers on most properties. But buyers also have good news...the economy is keeping interest rates extremely low which translates to lower payments.
With sunshine nearly every day, flowers in bloom, and warmer temperatures on the way,
I expect that open houses will be busier than ever.
This promises to be a season to remember.

Who Pays What?

Over the years, I have received offers from buyers' agents on Santa Clara County properties that included unusual terms. The closing costs established by custom can be flexible, but in most cases, local Realtors know that in our county, the seller pays title and escrow fees, and "across the border" in San Mateo County, the buyer is expected to cover these costs.
The poor buyers selling in San Jose and buying in San Mateo can be hit by a double whammy, whereas someone selling a house in Belmont and buying in Sunnyvale makes out like a bandit regarding closing costs.
If an agent doesn't know these area guidelines, he or she can cost the buyer a premium in escrow. For instance, a San Francisco broker once handed me an offer that had his buyer paying all the closing costs on a house in Cupertino...perfectly legal, but an unexpected bonus for the seller, just because the agent didn't do his homework.
Cornerstone Title recently sent out an updated information sheet of the customary expenses in all the Northern California Counties that my readers should find interesting.

Debunking Real Estate Myths

A recent article on Trulia described widely-held myths about the real estate market. Here's my take on it.

1. Myth: Buyers with bad credit can’t qualify for home loans.
Even though requirements have tightened up considerably, recently, they seem to have relaxed a bit. A couple of the largest lenders of FHA loans announced that they’ve dropped the minimum FICO score guideline from 620 to 580, which is actually a fairly low score, but they are expecting a 5-10% down payment with these lower scores.

2. Myth: The Mortgage Interest Deduction isn’t long for this world.
The National Commission on Fiscal Responsibility and Reform caused a massive wave of fear when they recommended Mortgage Interest Deduction (MID) reform, which would dramatically reduce the size of the deduction.
Fact is, the Commission made a huge set of recommendations to Congress, but only a few are likely to be adopted. MID reform is not one of them, since economists and industry groups are convincing Congress that MID reform any time in the near future would handicap the housing recovery.

3. Myth: It’s just a matter of time before loan guidelines loosen up.
It’s possible that loans are as easy to get as they’re going to get. Zero-down mortgages won't be coming back anytime soon. If you want to get into the market, the time to get yourself ready is now!

4. Myth: If you don’t have equity, you can’t refi.
If your loan is held by Fannie Mae or Freddie Mac, they will actually refinance it up to 125% of its current value, assuming you otherwise qualify for the loan.
My niece and her husband recently refinanced their "underwater" Florida home.
If your loan is not owned by Fannie or Freddie, you might be a candidate for the FHA “Short Refi” program. While most mortgage workout plans are only available to people who are behind on their loans, FHA's Short Refi program is available to homeowners who are current on their mortgages and need to refinance up to 115 percent of their homes’ value.

5. Myth: If you’ve lost your job and can’t make your mortgage payment, you might as well mail in your keys.Until recently, this was essentially true, but there are some new funds available in the states with the hardest hit housing and job markets, which have been designated specifically for out-of-work homeowners.

The Hesitant Buyer

USA Weekend magazine had an article today by Annalisa Burgos, called "6 Myths of Buying a Home." It was aimed at first-time buyers, and contained common sense advice about treating a home purchase as a business transaction.
These suggestions may be easy to give, but having worked with many new buyers for more than three decades, I know that they are common concerns for what may be their largest financial decision.
So much of this process is emotional that it is nearly impossible for home buyers to narrow it down to "strictly business." The easiest advice to accept is her most sensible:
Realize that you should verify the information given in the listing by checking the details yourselves.
Don't stretch to buy as much house as you can get...not in today's market and in light of the current economy. And realize that your home's value may not increase very soon.
Some of her advice was reassuring for those suffering from "Buyers' Remorse."
As long as you were comfortable with the offer you made, don't be concerned that the seller accepted your offer right away. A purchase should be a win-win situation.
I found the two comments about buyers expecting to find the perfect home, and waiting for the house to "speak to them" to be the most familiar. In one of my first posts, I compared the home search to the search for a spouse. In housing or in love, finding the one that fills most of your needs may be as good as it gets.

My Taxes are Done

Another successful bout with Quicken and Turbotax, and my Federal and State Taxes are completed for another year.
With the government at every level hungry for more tax dollars, our Real Estate lobby is fighting to hold the line on the home mortgage deductions.
Tara at Trulia had some great pointers for homeowners filing their taxes this year.
Ask a roomful of homeowners what's so great about owning versus renting, and you'll hear them holler in unison: "the tax deductions!"
That means that if you're in a 28% tax bracket, Uncle Sam effectively subsidizes about a third of your borrowing costs or more, making your home more affordable or allowing you to buy a larger home than you could have otherwise. Also, big chunks of your closing costs are tax deductible, and hundreds of thousands of dollars of any profit (or capital gains) that you realize when you sell your home are exempt from income taxes.
Remember: You Have to Itemize Your Return to Claim Your Deductions.
During the recent debate on Capitol Hill about whether the mortgage interest deduction should be eliminated, it came out that nearly 40% of homeowners lose out on their major tax advantages every year when they fail to itemize their income taxes.
Another Point to Remember: Tax Relief for Loan Modifications, Short Sales and Foreclosures Is Only Around Through 2012.
2011 is projected to be the peak year for foreclosures during this market cycle. Distressed homeowners who are on the brink of a short sale, loan modification or foreclosure should be aware that normally, any mortgage balance that is wiped out by one of these outcomes is taxed as what the IRS calls Cancellation of Debt Income, or CODI.
The IRS is currently not charging income taxes on CODI incurred through a loan mod, short sale or foreclosure on most primary residences through 2012. But as I've mentioned before, banks are taking many months, or even years, to work out mortgages in any of these ways. If you foresee any of these outcomes in your future, don't put things off. Do what you can to get to closure on your distressed home and loan, ASAP, while you won't have income taxes to add as the insult on top of your significant housing injury.