Thursday, January 29, 2009

Another bail-out is taking shape...but what's in it for me?

Yesterday the House of Representatives passed H.R. 1, The American Recovery and Reinvestment Act of 2009 by a 244 to 188 vote. Zero Republicans voted yes and 11 Democrats voted no. It still needs to get through the Senate, and, if passed, will likely be tweaked along the way. But as it stands right now there are a couple of positive pieces that stand out to me as a San Diego Realtor.

The first is the bill's measure extending all 2008 Metropolitan Statistical Areas’ (MSAs’) Fannie Mae, Freddie Mac, and FHA loan limits through the end of this year.

Huh? English please.

Loan limits have traditionally been insured by the government up to $417,000 (referred to as "conforming"). Because they are government insured they are seen as less risky to banks and, therefore, carry lower rates than higher balanced loans. In higher cost areas, like San Diego, loan balances tend to be higher than in areas like, say, Ohio where most home loans are under $417,000. So last year the government created a new temporary limit in higher cost areas based on the median priced home in that particular area with a maximum limit of $729,750.

On December 31, 2008 that limit expired and was reduced to $625,500. The new stimulus bill seeks to reinstate those 2008 limits through the end of 2009. This helps home owners in San Diego, and other high cost areas, with refinancing. It also allows more homes to be sold in higher cost markets, which benefits both buyers and sellers alike. If this sounds like a pretty logical idea to you (higher cost areas = higher insured loan limits) then I'm sure your next question is "Shouldn't this be a permanent increase?" Well, logical people like you and me say "Yes it should!"

The second measure in the bill that stood out to me was eliminating the repayment requirement on the first-time home buyer tax credit for qualified buyers who purchase a home between Dec. 31, 2008, and July 1 2009. If you're asking, "Huh? What $7500 first-time home buyer tax credit?" you are not alone. I think a lot of people are unaware of this recent (and again, temporary) tax credit. So if you are one of these people you can read more about it here.

The big deterrent to getting more first-time buyers into the market with this tax credit is the fact that it has to be re-paid. So eliminating the repayment feature would be one really good step. Another would be to extend it all the way through the end of 2009 (hint, hint if anyone from the government is reading this blog).

Although I think both of these provisions are a step in the right direction, the major thing that I think needs all of our government's immediate attention is the second half of the original $700 billion stimulus bill...That, so far, has been about as stimulating as a weak cup of decaf. I thought the point of injecting $350 billion into the banks was to get them to lend, no? Seeing as how no one (not the banks or the treasury department) can really account for what was actually done with the first $350 billion, I would hope there would be a few more restrictions and requirements put on the second $350 billion.

As National Association of REALTORS® President Charles McMillan sums this all up, "We think this bill is a great first step in helping our economy on the road to recovery. It is also important that Congress and the new administration refocus the use of Troubled Asset Relief Program dollars to add liquidity to the mortgage market and make mortgage loans and other loans more available to America’s working families.”

To which I say, "Amen!" He must be reading my blog!

Tuesday, January 27, 2009

Latest home price numbers...This bad news could be your good news.

Okay, so which news do you want first...The good or the bad?

Let's start with the bad.

The dreaded S&P Case-Shiller Home Price Index, which tracks prices in 20 cities throughout the U.S., released it's November report, and once again the numbers didn't look good. I'll spare you the boredom of reading all the numbers, but will tell you that San Diego experienced another 2.3% drop in prices from October, and a 25.8% drop year-over-year (meaning November 2007 to November 2008). This isn't really "breaking news," however, as this is now the 28Th consecutive month that this report has registered declines.

"Um, hello? I thought you said there was good news?"

Well, there is good news for buyers. The major reason that these numbers look so bad is because an increasing number of these sales over the last year have been foreclosures and short-sales. These properties tend to sell at "bargain basement" prices as banks look to quickly unload their inventory. Add in historically low mortgage rates to the mix and you have a perfect storm for buyers.

"There's a pretty active housing market, it's simply at a lower-priced inventory," says Michael Feder, chief executive of the New York based derivatives firm, Radar Logic.

According to their data, and a recent story in Forbes, real estate transactions in San Diego are up 90% in the last few months as buyers compete for the available bargains. (See video below for more)

We are definitely seeing a lot of first-time buyers and investors jumping back in to the San Diego real estate market. In fact, the majority of our transactions in 2008 were with buyers, and almost 90% of those buyers bought a property that was in foreclosure! These dramatic price drops are bringing affordability back down to earth and savvy buyers back into the market.

Friday, January 23, 2009

Is it the time to buy, sell...or blog?

Well, with my first post I can definitely tell you the answer is yes!...or no...or maybe...well it depends. How's the house? Where are rates right now? How much do you owe? What's going on with the latest government bailout and how's that affecting the market? Have we hit the bottom yet?

I know that there has been A LOT of news out there in the last couple of years that may be confusing and a bit scary, so I hope to help make sense of it all. Welcome to Buy, Sell or Blog? where in the weeks, months and many posts to come I will be discussing the answers to that question, as well as a broad range of other topics in the world of real estate here in sunny San Diego and across the U.S.

"Who the heck are you, and what do you know anyway" you might ask? Well, thanks for asking! My name is Michael, I'm the Barrow half of Neely, Barrow & Associates, a local real estate team here in San Diego. My business partner Richard (who may be guest blogging from time to time) and I have a combined 15 years of experience successfully representing both buyers and sellers alike in the greater San Diego area. I started off in the mortgage business, but after a couple of years of sheer boredom I followed in the footsteps of my father and mother and went into real estate, which I love! So I guess that makes me a son of a preacher man... son of a ... son of a Realtor, or rather, Realtors.

Anyway, enough about me! Check back soon for my next post on what's going on in the world of real estate. And, please, feel free to comment, email me and ask questions, etc. See you soon!