With the announcement today that the Federal Reserve would buy $100 billion in debt from Fannie Mae, Freddie Mac and the Federal Home Loan Banks the Dow and Nasdaq took an upswing and interest rates dropped to the lowest we’ve seen in a while!!! Conforming conventional loans were as low as 5.250% and FHA were 5.50%. Remember: right now you can do FHA loans with only 3% down (but there are loan limits…call for more information). After January 1st, 2009 FHA will require 3.5% down.
Another piece of good news was that Freddie Mac said it is eliminating upfront fees charged to lender for fixed-rate purchase loans for “super conforming” mortgages above the $417,000 conforming loan limit. Because Fannie and Freddie are competitors, it’s very common for one to follow the other’s lead on fees. Also, Freddie Mac said it’s eliminating or reducing delivery fees on “super conforming” mortgages in the range of $417k to $625,500 that it purchases after January 2nd, 2009.
Hopefully, this could definitely influence a loosening of our credit markets. I just experienced my first “sale-fail” in the jumbo market (above $417,000 in the Portland, OR marketplace) due to an inability to secure financing. The property would have easily appraised and the borrower was more than qualified. The rules on the jumbo financing scene have been changing frequently and we got caught in the “cross-hairs”. I equate this failed transaction with traversing a high mountain pass in wintertime. It’s all about timing! At one moment, you are nimbly navigating through the snow flakes and the next second you’re inextricably buried in the snowfall. Only a day later, other drivers are motoring on dry pavement.
Credit markets loosen, people are more confident and less stressed about acquiring mortgage loans, the housing market starts to move again and I do believe that will strongly affect other aspects of our suffering economy….or at least it’s one “giant step”!!!
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The newly approved tax credit for first-time buyers is like having a 15 year, interest-free loan. The down payment and closing costs may actually be less than the credit the buyer receives.The Housing and Economic Recovery Act of 2008 includes a tax credit for qualified purchases between April 8, 2008 and June 30, 2009. The credit is 10% of the purchase price not to exceed $7,500.To be eligible for the credit, the taxpayer’s adjusted gross income cannot exceed $75,000 if they file their tax as a single person or $150,000 if they are married filing jointly. Adjusted gross income is total annual income reduced by things like qualified retirement contributions, alimony, moving expenses, and a few others. The taxpayer and spouse, if married, must not have had an ownership interest in a principal residence during the three years prior to the purchase of the home in which the credit is being claimed.The tax credit is repayable over a 15 year period at zero interest. Each year 6.7% of the tax credit is repaid until it is repaid or the home is sold whichever comes first. The first payment isn’t due until two years after the home is purchased. If the home is sold prior to repaying the tax credit, the balance of the unpaid credit is due in that tax year.A buyer purchasing a $200,000 home with a FHA mortgage would require a 3.5% down payment or $7,000. The buyer would also be responsible for their closing costs. The $7,500 tax credit effective at filing that year’s income tax return would recover the $7,000 down payment plus $500 of the closing costs paid by the buyer. Obviously, they have to have the money for the down payment at the time of closing and won’t get the tax credit until they file their tax return the next year.
| Tax Credit Example |
| Adjusted Gross Income |
<$150,000 |
| Purchase Price |
$200,000 |
| Tax Credit – 10% of Purchase Price |
$20,000 |
| Maximum Tax Credit |
$7,500 |
| Annual Repayment |
$500 |
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SINCE JANUARY 2000, THE AVERAGE RETURNS FOR THE FOLLOWING MARKET INDICES HAVE BEEN:
DJIA: +0.894%
NASDAQ: -4.894%
S&P 500: -0.799%
S&P/CASE-SHILLER HOME PRICE INDEX: +7.964%
JUST FYI
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Here are the steps to take to get your property taxes reduced on the basis of the decline in market value:1. Search Yahoo! or Google to find the Web site for your county tax assessor’s office or tax collector’s office.2. Go to the Forms section and look for a form with the words “reassessment request” or “decline in market value.” If you can’t find it, give the office a ring and ask them to fax, mail or e-mail the form to you.3. Usually the request will ask you for (a) an estimate of the current market value of your home and (b) a list of recent, comparable sales in your neighborhood supporting that estimate of value. Keep in mind that you are trying to make the case that your property value is significantly lower now than when you bought it — so list legitimate comparable sales that support that argument, or you are wasting your time! In other words, don’t list the cutest, best, highest-priced homes — use homes that are similar and close to yours (within 1/2 mile to 1 mile, if possible) that sold in the lower price range in which you are asking the assessor to reassess your home.4. Sign it and mail it! Allow several weeks, then call and check on the progress of your request. If it’s accepted, you’re golden. If it’s denied, there will be a more formal application and appeals process available to you, and you can decide at that time whether it makes sense to undertake that.
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In the wake of the seemingly endless articles on the “state of our current national credit crisis” and our presently challenged local real estate market, it was refreshing to read some good news this week. The New York Times, the front page of the metro section of the Oregonian (Friday 08/29) and some online sources all seem to have “some folks in the know” willing to predict a turn-around in the real estate market by Spring to mid-2009!!! Then Forbes.com put Portland as #4 of their 10 cities “Where Home Prices are Likely to Rise”!! I know that seems a ways off if you must sell right now, but in the scope of things (especially considering that our local market has never suffered like many markets across the nation) that’s not far away. It might be time to purchase that investment property or 2nd home? Here’s the link to the Forbes article:
http://www.forbes.com/2008/08/25/housing-prices-rising-forbeslife-cx_mw_0825realestate_slide_3.html?partner=email
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Janeese Jackson
Bill Norris
