First-Time Home Buyers Can Turn Tax Credit Into Cash
First-time buyers eligible for the $8,000 federal tax credit who apply for mortgages insured by the Federal Housing Administration may soon also be eligible for bridge loans or cash advances that they can use for the downpayment, closing costs or other loan expenses pending receipt of their tax credit check from the IRS. The FHA change was announced this month by Housing and Urban Development Secretary Shaun Donovan. As many as half of all would-be first-time buyers do not have enough cash on hand for a downpayment and closing costs, according to building and real estate industry estimates. By advancing these buyers as much as $8,000 at closing, many more would be able to afford the purchase. Officials at NAHB say the bridge loan feature could double the total number of home purchases stimulated by the 2009 tax credit program to more than 300,000, depending on how many private lenders and state housing agencies participate. The new bridge loans and cash-advance features of the federal credit may not be available immediately through private lenders, mortgage industry leaders say. Among the key questions to be answered: Where will non-depository mortgage companies get the $8,000 in advance money to provide upfront to buyers? Although most major banks offer second-mortgage programs, the FHA guidelines stipulate that the tax credit advances cannot be secured by a lien on the property, but only by the tax credit to be received by the purchaser. In the meantime, would-be buyers who believe they’re eligible for the credit should shift into high gear shopping for a house — the Cinderella closing date of Nov. 30 is looming — even if they will need a bridge loan or a cash advance to complete the deal. The odds are good that by the time they’re ready to get a mortgage and go to closing, at least some local FHA-approved lenders will be actively in the market with bridge loans. (www.washingtonpost.com)
Washington Post (5/23/09); Kenneth R. Harney
[Return to top]
U.S. Home Builders Work Hard to Turn Renters Into Buyers
To turn renters into home owners, home builders are being creative, gathering addresses to contact tenants, participating in rent-with-equity programs and wooing them with pet adopt-a-thons. Mid-America Apartment Communities said the number of renters leaving their properties to buy a home in the first quarter fell by 31% compared with a year earlier. Still, with nearly 89 million renters nationwide, there’s plenty of potential to sell the 340,000 single-family homes residential research firm Metrostudy estimates will be started this year. “If every one of them was from a renter you’re just barely putting a dent in the apartment supply out there,” said Jeffrey T. Metzger, KB Home’s president and chief executive. “I think it’s a large untapped market.” KB Home redid its Web site to highlight monthly payments over the total price. At the Sage at Desert Passage in the former bubble market of Maricopa, Ariz., “Right Now You Can Own From $773 a Month,” assuming a downpayment of 3.5%, good credit and a 30-year fixed loan. The builder also offers more flexible and personalized floor plans. “It’s certainly been a help because our sales are up and our first-time buyer sales are up,” Metzger said, adding that in KB Home’s first quarter 70% of deliveries went to first-time buyers, a spike from 53% a year ago. Because renters often live in cookie-cutter communities with plain-vanilla walls, KB Home holds seminars in its design studios that let buyers craft a near-customized house — a strategy that also helps compete with foreclosures. KB Home and several other builders also work with apartment giant Equity Residential in its Rent With Equity program. For each rent payment, Equity grants as much as 20% in a non-cash rent credit. Buyers can use the credit for up to 3% off the home price. (www.dowjones.com)
Dow Jones News Service (5/12/09); Dawn Wotapka
[Return to top]
More Takers for 15-Year Loans
Brokers and mortgage industry executives say that fixed-rate mortgages with a 15-year term are becoming especially popular among people who want to shed debt more quickly, and in light of the current economic atmosphere, that goal is perhaps more widely applicable than ever. Debt shedding comes at a price. Those borrowing $400,000 on a 15-year loan, with a 4.375% interest rate, the average rate earlier this month, can expect to pay about $3,034 a month, compared with about $2,056 a month for a 30-year fixed-rate loan with a 4.625% average rate. The payment excludes costs like property taxes and insurance. Because a 15-year loan also has 180 fewer interest payments than a 30-year loan, the borrower with that 15-year loan would pay $194,000 less in interest over the life of the mortgage. Freddie Mac spokesman Brad German said that the company’s economists do not have data to track the volume of different mortgages, but that anecdotal evidence suggests a rise in 15-year fixed-rate loan activity during the refinancing boom of the past several months. “The thinking is that many baby boom mortgagors are taking advantage of the low rates to refi into a mortgage that will enable them to live a relatively care-free retirement life — i.e., free and clear of mortgage debt.” The number of 15-year mortgages issued in February jumped to 74,497 from 42,178 in January, according to First American CoreLogic, a real estate consulting company in San Francisco. And according to Bloomberg News, $15.9 billion worth of 15-year mortgages were issued in March, more than twice the $7.5 billion issued in February. (www.nytimes.com)
New York Times (5/24/09); Bob Tedeschi
[Return to top]
Amid Housing Bust, Phoenix Begins a New Frenzy
In Phoenix, which is enduring one of the largest tumbles in housing prices for any urban area since the Depression, there is an unrelenting stream of foreclosures for investors to choose from. On some days, hundreds are offered for sale at the auctions that take place on the plaza in front of the county courthouse. The low end of the market here — and in some equally hard-hit places like inland California and coastal Florida — is becoming as wild as anything during the boom. One real estate agent was showing a foreclosed house to a prospective client when a passer-by saw the open door, came in and snapped up the property. One agent says she was having the lock changed on a bank-owned home when a man happened by, found out from the locksmith that it was available, and immediately bought it. Bidding wars are routine. Absentee buyers, who can be either investors or individuals purchasing a vacation property, bought nearly four of every 10 homes sold in the Phoenix metro area in April, according to the research firm MDA DataQuick. That is up 50% since late 2007, and is nearly the same ratio as at the 2005 peak. In its foray into the American market, CBI Group, a real estate fund based in Calgary, Alberta, is buying 175 rental houses in Phoenix. (www.nytimes.com)
New York Times (5/24/09); David Streitfeld
[Return to top]
Recession + Renovation = Bargain Prices
“There’re a lot of hungry contractors out there,” says Mark Scott, owner of Mark IV Builders in Bethesda, Md. He estimates remodeling costs in his region are down 15% from two years ago. He’s laid off 16 of 26 people. Nationwide, the home improvement market is expected to shrink 12% this year to $217 billion for owner-occupied properties, after a 10% decline last year, says Harvard University’s Joint Center for Housing Studies. “This is a window for remodeling,” says Jim Haughey, chief economist for market researcher Reed Construction Data. He just had his driveway repaved for 30% less than he would have paid three years ago, he says, and saved 25% off labor rates of 18 months ago to put tile in a kitchen. “It’s a good time to do the work if you’ve got the money or the credit,” he says. While home owners get savings, contractors are adjusting to the new economics. At Mark IV, the average-size job is now $125,000, down from $350,000 two years ago, Scott says. Home owners still want new kitchens and bathrooms — often the safest remodeling investments — but second-floor additions and new master suites were the rage when housing was booming, Scott says. Mark IV also recently launched a division to upgrade homes on energy efficiency. It’ll even take “handyman” jobs that it wouldn’t have taken before, Scott says. (www.usatoday.com)
USA Today (5/21/09); Julie Schmit
[Return to top]
Active-Adult Housing Shows No Letup Despite Recession
“Business has never been better,” says Jeff Katz, who specializes in representing potential buyers in “active adult” developments in Florida that cater to residents 55 or older; he attributes his success to that niche, which includes about one-fifth of all buyers in the U.S. This year, he has closed or put under contract nine homes in Palm Beach County. Last year, for the first time in his seven years in the business, he ranked among the top 100 ReMax agents — out of 4,000 — based on commissions. He focuses on properties varying in price from $300,000 to $600,000 and said about 90% of his clients are from the nation’s Northeast region. GL Homes is marketing houses for sale in two active adult developments — Valencia Pointe in Boynton Beach and the Valencia Reserve in Delray Beach. Between the two developments, GL has sold more than 100 homes this year, totaling about $36 million in sales, said Marcie DePlaza, the company’s division president. About 60% of the buyers are paying cash, she said. They include retirees moving from the Northeast, cost-conscious buyers relocating from country club communities where they have to pay thousands of dollars in annual membership fees, and others who were priced out of the market during the housing boom and are now finding bargains. About half the units that went under contract this year in those developments have yet to close, but DePlaza said she considers them done deals. The contract default rate in GL’s active adult communities over the past year has been less than 2%, she said. (www.dailybusinessreview.com)
Palm Beach Daily Business Review (5/22/09); Polyana da Costa
[Return to top]
|
