It has been said that a recession is when my neighbor loses his job and a depression is when I lose mine. Lately one can substitute the word "house" for "job" and probably echo the sentiments of a number of people in the current economy.
Experts seem to be having trouble deciding if we are or will be soon in a recession.
But whether we are or not, talk of recession can make homebuyers weary. So below we are addressing five concerns that buyers might have in this market.
Concern # 1: Bad Market Conditions
Everyone knows the housing market is facing challenges, but what many people may not understand is that homebuilding is a cyclical business. The last housing downturn occurred in the late 1980s and early 1990s. New home sales began recovering in 1992 and continued growing until the next peak in 2005.
Most people have heard the saying "Buy low, sell high." Right now it is a buyer's market -- that means you can get more for your money! You have more choices, more value, more design features, lower interest rates and more loan programs to choose from.
Keep in mind though that the market can change at any time. Waiting could mean missing out on opportunities. We are already seeing an increase in competition for buying homes in the Greater Las Vegas area. Why wait for prices and interest rates to go up when you could be living in the home of your dreams right now?
Concern #2 -- Dropping Home Values
Despite short-term market cycles and fluctuations, long-term home values have increased historically. On average, the value of a home nearly doubles every ten years, according to research from the National Association of REALTORS®. And the Federal Deposit Insurance Corporation reported that between 1978 and 2003, the nationwide House Price Index grew an average of 5% per year.
These statistics are sound reminders that home-buyers should keep their long-term goals in mind. While today's market may not be optimal for investors seeking a quick turnaround profit, it could be an ideal window of opportunity for people seeking a place to live out their lives and build memories, dreams and futures.
In addition, by having so many choices in this market, you can enhance your investment by choosing features that will add re-sale value later. The current market provides opportunities for creating a lot of "sellability" into your home that will not only make it easier to re-sale later, but will make it enjoyable to live in now.
Finally, if you are an investor, this market provides a nice basis for long-term investments with an opportunity to take advantage of tax shelters and a growing rental home market in the meantime. Quick-flip investments are not advised in this market, but the long-term picture is still advantageous for the portfolio.
Concern #3 Selling Current Home
Although selling a home can be difficult in today's market, there are many things you can do to help your home stand out from the rest. Staging a home is a great place to start. From strategically arranging furniture to adding warm and stylish accents, staging is all about making the home feel inviting an allowing others to imagine living there.
Home inspections are also important. Addressing problems before putting a home on the market can add value way beyond the cost of the inspection and the fixes.
If you want to wait out the market and sell later, turning your home into a rental might be the best way to go. This doesn't work for all properties, but most homeowners are not aware of the potential their homes have to rent or the tax advantages of doing so. Finding the right tenant is key.
In any case, working with a professional Realtor® who has experience in turning homes into investments can make all the difference. If you want to take advantage of the market by moving into a home more in tune with your dreams, selling your current home doesn't have to be a hindrance.
Concern #4 Negative News Coverage
Homebuyers today are flooded with national economic news that is not necessarily representative of their local market. Every area is different. Even neighborhoods within a given area are different. Las Vegas has been and remains very different from the nation.
Realtors® know local markets and relying upon one with that knowledge can make the difference between a good or bad investment. We know and can educate you in local economies, employment, schools, transportation, amenities and communities.
Concern #5 Making a Bad Investment
If you are currently renting, you should learn about the potential tax benefits of homeownership. Paying rent each month makes no financial investment in your future. Buying a home invests in your future.
There are also many lifestyle benefits drawn from homeownership. When you buy a new home, you're investing in something far more valuable than any stock or bond can offer. You're investing in memories. A home is a place to throw dinner parties, hold game nights and host sleepovers; it is a place to play a game of catch in the backyard or sit on the front porch and watch the neighborhood kids play.
In this market, homeownership is more affordable than it has been in years. First-time buyers may not be able to take advantage of these prices for long. Now is a good time to move from rental to homeownership.
THE DULCIE CRAWFORD GROUP has considerable expertise in the Las Vegas/Henderson real estate market. 2008 is a great year to buy a house in our area. Feel free to contact us if you want to know more about the local market and explore whether it is time to buy, sell or convert a home.
Our thanks to Richmond American Homes as a major source for this article.
Thursday, May 8, 2008
Monday, May 5, 2008
Credit Crunch Puts Squeeze on Specialized Mortgages
While the fact is that this is a buyer's market and a great time, especially, to invest in housing in Las Vegas, it is no fiction that lending has changed due to recent downturns and challenges in the banking industry. The LA Times had a great article yesterday discussing ways in which mortgages have changed in the past couple of years.
Highlights:
Highlights:
In a move scheduled to take effect for all loans delivered after Aug. 8, Freddie Mac will restrict financing to second-home and investment purchasers who already have "individual or joint ownership" interests in multiple properties. In the case of second-home buyers, they will be ineligible for new mortgages through Freddie if they have ownership interests in more than four properties securing debt, including the one they propose to finance.
Why the continuing rollbacks, and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. In the areas where they see inordinate risk, they are reacting by eradicating that risk. Some of those high-loss loan products -- mass-marketed option ARMs with minimal down payments and "stated" incomes, for instance -- probably never will be seen again. Others are likely to return only with tougher underwriting standards and higher fees tied to credit and geographic risks.
DON'T OVERPAY... FILE A PROPERTY TAX APPEAL
Property taxes seem to jump up year after year. Unfortunately, we've become so accustomed to rising taxes that it's no longer a surprise. But here's something that may surprise you. Did you know that over the last eight years, property taxes have actually outpaced even inflation? Those rising taxes - combined with the recent plateau in home values in some areas - mean you may be paying more than your fair share.
In fact, the National Taxpayers Union estimated that as many as 60% of home values were assessed too high, resulting in an incorrectly larger property tax bill.
Based on recent market activity and the rising property taxes across the country, there's a chance you may be in the group of people paying too much. In fact, homeowners in declining markets are receiving solicitations from companies that charge up to $250 to help lower property taxes. But with the steps below, you can work with your local County Assessor to lower property taxes for free...and save yourself the $250!
The good news: it's easy.
First, contact your local tax assessor's office and ask for someone in the reassessment area. Find out when appeals are heard, and how the process for submitting a property tax appeal works.
Additionally, ask for a copy of your property card. Review the card and confirm that the basic information about your property is correct. For example, is the square footage and number of rooms for your home accurate? If the number is incorrect, the county may change the assessment without a formal appeal. If everything on the property card is correct but the assessed value still seems too high, your next step is to gather the following documentation to support an appeal. And don't be surprised if the assessed value is lower than what you think the market value for your home is--many counties use a formula which uses a percentage of market value to determine assessed value. Ask what the formula is... because an assessment that is less than market value still might be too high.
If you have a current appraisal that supports the value being lower using recent market-value information, many counties will accept a copy of the appraisal with the appeal. If the appraisal is outdated, you can order a new one--just call me for a referral to a great appraiser. You can also visit the local assessor's office or search online, and look through the public records for other homes that have similar features to yours, but have lower assessments. They will be able to give you current market information for your neighborhood, and help you see how your market value and assessed value stacks up against your neighbors.
Submitting an appeal is generally a fairly simple process, but make sure to take the time to fill out all forms in advance and be prepared with your documentation if there is an in-person hearing that needs to take place.
More good news...
According to the National Taxpayers Union, about 33% of property tax appeals succeed! Taking the time to review the accuracy of a tax bill could easily save you hundreds of dollars per year, adding up to thousands of dollars during the time you own your home.
Thanks to Paula Clark for this valuable information
In fact, the National Taxpayers Union estimated that as many as 60% of home values were assessed too high, resulting in an incorrectly larger property tax bill.
Based on recent market activity and the rising property taxes across the country, there's a chance you may be in the group of people paying too much. In fact, homeowners in declining markets are receiving solicitations from companies that charge up to $250 to help lower property taxes. But with the steps below, you can work with your local County Assessor to lower property taxes for free...and save yourself the $250!
The good news: it's easy.
First, contact your local tax assessor's office and ask for someone in the reassessment area. Find out when appeals are heard, and how the process for submitting a property tax appeal works.
Additionally, ask for a copy of your property card. Review the card and confirm that the basic information about your property is correct. For example, is the square footage and number of rooms for your home accurate? If the number is incorrect, the county may change the assessment without a formal appeal. If everything on the property card is correct but the assessed value still seems too high, your next step is to gather the following documentation to support an appeal. And don't be surprised if the assessed value is lower than what you think the market value for your home is--many counties use a formula which uses a percentage of market value to determine assessed value. Ask what the formula is... because an assessment that is less than market value still might be too high.
If you have a current appraisal that supports the value being lower using recent market-value information, many counties will accept a copy of the appraisal with the appeal. If the appraisal is outdated, you can order a new one--just call me for a referral to a great appraiser. You can also visit the local assessor's office or search online, and look through the public records for other homes that have similar features to yours, but have lower assessments. They will be able to give you current market information for your neighborhood, and help you see how your market value and assessed value stacks up against your neighbors.
Submitting an appeal is generally a fairly simple process, but make sure to take the time to fill out all forms in advance and be prepared with your documentation if there is an in-person hearing that needs to take place.
More good news...
According to the National Taxpayers Union, about 33% of property tax appeals succeed! Taking the time to review the accuracy of a tax bill could easily save you hundreds of dollars per year, adding up to thousands of dollars during the time you own your home.
Thanks to Paula Clark for this valuable information
Thursday, May 1, 2008
NAHB Testifies before US House Committee
United States House Small Business Committee Subcommittee on Finance and Tax Hearing On
“The Effect of the Credit Crunch on Small Business Access to Capital”
Scott Eckstein testified yesterday (April 30, 2008), on behalf of the National Association of Home Builders, before a U.S. House of Representatives committee looking at the current credit situation and its effect on the smaller home builders across the country.
Their recommendations to the committee have implications for all real estate investors. Here are some highlights:
Click Here if you want more information on this committee and its work.
“The Effect of the Credit Crunch on Small Business Access to Capital”
Scott Eckstein testified yesterday (April 30, 2008), on behalf of the National Association of Home Builders, before a U.S. House of Representatives committee looking at the current credit situation and its effect on the smaller home builders across the country.
Their recommendations to the committee have implications for all real estate investors. Here are some highlights:
Broader Sources of AD&C Credit (acquisition, development and construction)
The current financing quagmire for home builders vividly illustrates the importance of developing additional sources of AD&C credit. ... A viable secondary market for AD&C loans would directly benefit builders and lenders by: (1) transferring risk away from lenders; (2) increasing availability of funds so that projects can be
more reliably completed; and (3) mitigating the devastating impact of equity calls on builders, or transfers of partially completed projects to banks under capital and/or regulatory pressure.
Balanced Regulation
The approach of the regulators in overseeing institutions involved in AD&C lending will be an important factor determining the length and severity of the current housing and economic recession as well as the vigor of the subsequent recovery. It is crucial for the banking regulators to take a balanced approach when evaluating bank lending, especially in regard to AD&C loans. The regulators should continue to encourage institutions to pursue sound loans on viable projects. In addition, the regulators should provide additional guidance to lenders on dealing with outstanding
AD&C loans to ensure that losses are minimized through flexible and prudent loan accommodations. Such actions are just as critical in a nascent recovery as in the current downswing.
Federal Home Loan Bank Guarantees of Municipal Bonds
S. 1963, introduced in the Senate by Senators Rockefeller, Crapo, Stabenow and Carper, would address this impediment. The bill would amend Section 149(b) of the Internal Revenue Code by adding FHLBanks to the list of government agencies and government-sponsored enterprises (GSEs) authorized to provide credit enhancement for tax-exempt municipal bonds. Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) have been permitted since 1984 to provide such credit support. A similar provision was included in the Housing Assistance Tax Act of 2008 (H.R. 5720) that was recently approved by the House Ways and Means Committee. Enactment of this measure would help to significantly lower financing costs on public infrastructure and other projects that are the foundation for meeting community housing and economic development needs.
Home Buyer Tax Credit
Two causal factors in the current housing downturn and the related credit crunch are
declining house prices and excess inventory. These elements are equally central to the outlook for the broader economy and the financial markets. Policies that stimulate home purchases in the immediate future can pay huge dividends. The biggest bang for the buck most likely would be provided by a temporary homebuyer tax credit, such as the credits approved recently by the Senate in the Foreclosure Prevention Act of 2008 and by the House Ways and Means Committee in the Housing Assistance Tax Act of 2008. Indeed, the recent revival of interest among prospective buyers suggests that temporary credits could stimulate a wave of home buying that could quickly reduce excess supply in housing markets and halt the dangerous erosion of house prices and mortgage credit quality. NAHB applauds the Congress for its efforts to create a homebuyer tax credit, and stand ready to work with Congress in crafting the most effective credit to help solve the current economic crisis.
Expand the Net Operating Loss Deduction Carryback
Home builders, like many businesses, are now reporting financial losses when a few years ago they were generating jobs, providing local development and paying taxes. For home builders large and small the importance of the ability to claim and carry back net operating losses (NOL) deductions to years when significant taxes were paid cannot be overstated. The inability to do so will result in the need to either increase high-cost borrowing or further liquidate land and homes, which
will only compound the existing inventory problem.
Expand the Mortgage Revenue Bond Program
The existing Mortgage Revenue Bond (MRB) program also offers a method of increasing
housing demand. A special allocation of bonds to be used for either purchase or refinancing would be beneficial for housing.
Expand Small Business Expensing
Section 179 of the tax code allows small business to expense the cost of investment for business property. The Economic Stimulus Act of 2008 temporarily expanded the rules so that small businesses may expense up to $250,000 of qualified investment for tax year 2008 ($128,000 would have otherwise applied in 2008, with that amount indexed for inflation through 2011). The expensing benefit is phased-out for business incurring more than $800,000 in qualified investments in 2008 ($510,000 would have otherwise applied in 2008, with that amount indexed for inflation
through 2011).
Click Here if you want more information on this committee and its work.
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