Sacramento Home Prices Rise in the Midst of Low Inventory…

Sacramento-area home prices rise in February amid low inventory

 

 

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Why Short Sales Take So Long…

Why Short Sales Take So Long

 

When buyers hear the term “short sale,” they typically think about distressed sellers and good deals — especially in markets where prices have ticked upwards. But the word “sale” can be misleading. In fact, many real estate agents have renamed “short sales” as “long-and-drawn-out sales.”

Here’s why short sales often take a long time to complete.

Banks and Bureaucracy

In a short sale, you need the seller’s bank to approve before you can close. Banks require dozens of pages of paperwork to evaluate whether or not to approve a short sale. Since the seller is asking the bank to accept a sale price that’s less than the mortgage amount, the bank needs to verify that a short sale is the right thing to do. Banks want to make sure the seller is indeed unable to stay in the home and can’t afford to pay off the difference between the market value and the bank’s loan amount.
Just as a bank scrutinizes a buyer’s finances in order to approve their loan, the financial institution wants to closely examine the seller’s finances to be sure that it is not giving its money away. With many thousands of dollars at stake, banks don’t want to rush through this process. By comparison, when you’re buying from a person, he or she is more motivated to keep things moving.

Paperwork Gets Lost in the Process

Banks require many documents, disclosures and signatures to complete a short sale. Many times they request that they are faxed in. If just one signature or page is missing from a file, the bank will likely hold off on the process until the file is complete. Given that these banks are losing money on short sales, they don’t allocate the same amount of resources they would to the customer service department for paying (and profitable) customers. With limited staff and so much paperwork, things get lost — and then the short sale process drags on.

Two Lenders = Double the Time

Many times a short sale seller has two loans. The larger loan is being shorted while the second, smaller loan — usually a home equity line of credit — is being completely wiped out. Often, these loans are with two separate banks. Each bank has its own system that doesn’t in any way communicate with the other bank’s system. The second bank may approve the short sale but put on a 30-day expiration. If the first bank’s approval comes at day 31, the seller must go back to the second bank and start over. As you can see, this too can drag out the short sale.

How to Expedite a Short Sale

Is it possible to work the system and speed up short sales? Absolutely.

If you’re selling a home as a short sale, don’t use an agent who doesn’t not have short sale experience. There are so many areas where short sales can get tripped up, so look for an experienced agent who knows how to push through the process.

If you’re a buyer and you found a short sale home you love, determine if the agent is an expert in short sales. If the agent doesn’t have much (or any) short sale experience, expect a long, rocky road.
Short sales are a different animal from traditional home sales — from how they’re priced, how they’re marketed and the lengthy sales timeframe. A savvy short sale agent will know exactly what they’re dealing with and what to expect, and can shorten the process immensely.

Best Regards, Chris Mesunas.

 

House Passes Flood Insurance Bill…

House passes flood insurance billDeborah Barfield Berry and Ledyard King, Gannett Washington Bureau

 

Congress moved closer Tuesday to final passage of legislation that would roll back sharp increases in premiums under the National Flood Insurance Program.

WASHINGTON — The House voted overwhelmingly Tuesday to approve bipartisan legislation that would block dramatic increases in premiums paid by some property owners covered under the federal flood insurance program.

The 306-91 vote follows a Senate vote on Jan. 30 approving similar legislation. The Senate could vote on the House version by the end of the week.

"Relief is on the way,'' Rep. Maxine Waters, D-Calif., said before the vote.

Under the House bill, called the Homeowner Flood Insurance Affordability Act, premiums under the National Flood Insurance Program (NFIP) could increase no more than 18% per property annually.

The legislation was crafted by Republican Rep. Michael Grimm of New York in response to premiums that in some cases had increased tenfold.

Rep. Bill Cassidy, R-La., who worked on the compromise, said the House measure strikes "the right balance'' between fiscal solvency for the flood insurance program and consumer affordability.

Supporters of the measure, including Gulf Coast lawmakers, said the increases were making it impossible for many people to keep their homes or sell them.

Critics, however, say taxpayers will be left to foot the bill for the financially troubled insurance program.

The premium increases were required under a 2012 law known as Biggert-Waters that was designed to designed to make the government's flood insurance program financially solvent by bringing rates in line with true flooding risks.

Premiums under the program have been heavily subsidized by taxpayers, and the program is $24 billion in debt.

The House measure also would repeal a provision in the Biggert-Waters law that increases premiums — up to the full-risk rate over five years — when the Federal Emergency Management Agency adopts new flood maps.

Waters, a co-author of the 2012 Biggert-Waters law, worked with Republicans on the recent compromise.

Under the compromise, homes that met code when they were built would be protected from rate spikes due to new flood mapping.

Biggert-Waters imposes 25% rate hikes on some but not all properties that have received premium subsidies through the NFIP. The program, run by FEMA, has traditionally charged premiums at about 40% to 45% of their full cost, with taxpayers subsidizing the rest.

The Senate-passed bill, by Democratic Sen. Robert Menendez of New Jersey and Republican Sen. Johnny Isakson of Georgia, would delay some of the premium increases for four years. The Federal Emergency Management Agency would use the time to complete a study of how to make the higher rates affordable.

"I'm encouraged by this progress and hope we can bring the bill over the finish line very, very soon," Menendez said Tuesday.

The successful effort to win passage of the bill reflected a rare moment of bipartisanship in a highly partisan Congress.

But conservative lawmakers and government watchdog groups oppose the effort to roll back the increased premiums, saying taxpayers should not have to subsidize flood insurance coverage for homeowners who build or buy in high-risk areas.

"It's not going to be very affordable for taxpayers,'' said Steve Ellis, vice president of Taxpayers for Common Sense. "This program, that's $24 billion in debt to the Treasury, is going to be saddled with these changes.''

Critics of the legislation complain it didn't go through the regular committee process.

"Everybody we talked to, virtually without fail, recognize that these delay and repeal efforts are damaging and counterproductive,'' said Andrew Moylan, a senior fellow at the R Street Institute. "Rushing a vote the way that they are is an indication that in their heart of hearts, they know it's the wrong thing to do.''

Rep. Randy Neugebauer, R-Texas, chairman of the House Financial Services Subcommittee on Housing and Insurance, opposed the measure, saying the federal flood insurance program is in "deep debt and it's putting taxpayers at risk for another government bailout.''

"Maintaining these subsidies hurts everyone in the long run,'' Neugebauer said.

In addition to capping annual premium increases at 18%, the House bill also would allow people buying homes covered under the federal flood insurance program to pay the subsidized premium rate at first, rather than the higher rate reflecting true flooding risk.

The House bill would be financed through small assessments on all NFIP policyholders that would go into a reserve fund for FEMA to pay future claims.

 

Buying vs. Renting…

Buy vs. rent: What you'll pay in the 10 biggest cities

Despite rising home prices and climbing mortgage rates, it's still cheaper to buy a home than rent one in these 10 major cities, according to Trulia. Here's how much you'll save.

Despite rising home prices and climbing mortgage rates, it's still cheaper to buy a home than rent one in major cities across the country, according to real estate web site Trulia, which analyzed data in 100 metro areas.

But home prices are just one factor to consider. Deciding whether to buy or rent also depends on the location and how long you plan to stay there. In most of the Rust-Belt cities, like Toledo and Detroit, the math overwhelmingly favors buying. In more expensive coastal markets, like Los Angeles and New York, it's a closer call.

Nationwide, homebuyers who remain in their homes for seven years will save an average of 38% over renting, Trulia found. A year ago, buying was 44% cheaper.

That means all of the initial transaction costs of buying a home — the broker's commission, title insurance, legal fees and other closing costs — will be offset by benefits, like tax write-offs and price appreciation. And those costs will become cheaper than the total costs of renting, which include insurance and agent commissions.

Best Regards, Chris Mesunas.

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Investors Losing Interest…

Investors Losing Interest in Housing, Despite Rise in Distressed Sales Share

Institutional investors appear to be losing interest in purchasing foreclosed properties for rentals in the face of rising property prices and interest rates and increased competition from homebuyers.   According to RealtyTrac's January 2014U.S. Residential and Foreclosure Sales Report, the share of home sales tied to institutional investors – entities that purchase ten or more properties in a calendar year – dropped to 5.2 percent in January, down from 7.9 percent in December and 8.2 percent in January 2013.  The January number was a 22 month low.

Daren Blomquist, a RealtyTrac vice president said, "Many have anticipated that the large institutional investors backed by private equity would start winding down their purchases of homes to rent, and the January sales numbers provide early evidence this is happening.  It's unlikely that this pullback in purchasing is weather-related given that there were increases in the institutional investor share of purchases in colder-weather markets such as Denver and Cincinnati, even while many warmer-weather markets in Florida and Arizona saw substantial decreases in the share of institutional investors from a year ago."

The fall back in institutional investors occurred in nearly three-quarters of the metropolitan areas tracked by the Irvine California company.  Areas with particularly large declines from a year earlier included Cape Coral-Fort Myers, Florida (-70 percent); Memphis (-64 percent), Tucson (-59 percent), and Tampa (-48 percent).  Institutional activity increased in 23 of the 101 areas with Austin, Texas notable for a 162 percent rise while Cincinnati was up 83 percent and Dallas 30 percent.

Institutional investment remains a major factor in sales in several areas including Jacksonville, Florida at 25.5 percent, Atlanta, (25.1 percent), and Austin (18.0).

Sales of all U.S. residential properties including single family homes, condos, and townhomes were at an estimated annual rate of 5.126 million units in January, a less than 1 percent increase from December and up 8 percent from a year earlier.  The rate of sales declined in seven states and 17 of the 50 largest metropolitan areas.

RealtyTrac said that foreclosure-related and short sales accounted for 17.5 percent of all residential sales in January, up from 14.9 percent in December.  In January 2013 distressed properties accounted for 18.7 percent of sales.  The distressed sales breakdown in January as a percent of all sales was 5.9 percent short sales, 10.2 percent bank owned real estate (REO) and 1.5 percent properties sold at foreclosure auction.

All-cash sales accounted for 44.4 percent of all U.S. residential sales in January, the seventh consecutive month where all-cash sales have been above the 35 percent level.  In several metro areas the majority of sales were all-cash; Miami (68.2 percent), Jacksonville, (66.2 percent), Memphis (64.4 percent) Tampa (61.5 percent) and Las Vegas (56.5 percent.)

The national median sales price of U.S. residential properties – including both distressed and non-distressed sales – was $165,957 in January, down 3 percent from December but up 1 percent from January 2013. The 3 percent monthly decrease was the biggest monthly drop since February 2013.  Some of the markets which had shown the fastest appreciation posted declines in January.  Some cities where prices fell 1 to 2 percent were San Francisco, Sacramento, Memphis, Cincinnati, Phoenix, and San Jose.  Prices in each, however, were a minimum of 19 percent above year-ago levels.

Best Regards, Chris Mesunas.

 

New Homes in Sacramento Areas…

Six-acre, 55-home community planned along Madison Avenue

 

 

Mortgage Availability Improves…

MORTGAGE AVAILABILITY IMPROVES

Written by 

According to a new survey from Fannie Mae, credit availability is improving. For the first time in over three years, the majority of consumers believe it's easier to get a mortgage.

Doug Duncan, Fannie Mae's chief economist said, "The gradual upward trend in this indicator during the last few months bodes well for the housing recovery and may be contributing to this month's increase in consumers' intention to buy rather than rent their next home."

The Mortgage Bankers Association (MBA) says consumers are correct – credit availability has increased, particularly in the jumbo and refinance loan markets.

Explained Mike Fratatoni, chief economist for the MBA, "The market continues to adapt to the new QM [Qualified Mortgage] regulation by eliminating products that do not fit inside of the QM box. This tightening is being offset, both in the market for higher balance loans, where lenders continue to loosen terms for jumbo loans, and in the refi market, where more lenders are offering streamline refinance programs."

But there could be other reasons that credit is more available. Credit reporting agency Transunion announced that the mortgage delinquency rate for the fourth quarter of 2013 was 3.85 percent, down from 5.08 percent.

Delinquencies have been steadily declining over the past two years, while improved home sales and rising prices have allowed many homeowners on the edge of delinquency to sell their homes and get into something more affordable.

Credit has been extraordinarily tight since 2008, as lenders struggled with federal claims of mortgage fraud. For years, lenders raised credit standards beyond what was required to qualify for federally guaranteed loans and loans destined for purchase by the securities industry.

As the government leveled fines and made repayment settlements with many of the big banks, lenders are more willing to make mortgage loans. With the most toxic loans before 2008 foreclosed and disposed, lenders have more confidence in loans generated since them.

In fact, Transunion also reported that more loans were generated to borrowers with less-than-perfect credit in Q4 2013.

"We are on the downward slope of the mortgage delinquency curve, so we expect to continue seeing delinquency rates that have not been seen for several years," said Steve Chaouki, head of financial services for TransUnion.

With job gains growing, relatively low interest rates available and a tight supply of homes insuring equity gains, mortgage delinquencies should continue declining, and buyers should feel more confident in their decision to buy a home in 2014.

 

10 of the most affordable cities to purchase a home…

Top 10 cities people are moving to

Whether it's the warm weather, jobs or cheap cost of living, these are the top 10 cities Americans are moving to, according Penske Truck Rental's annual list.

 

Atlanta

  • Median income: $66,300
  • Median home price: $166,000
  • Home price growth forecast : 5.3%

Even though it was hit hard by the recession, Atlanta has claimed the top spot on Penske's list for four years running. Home to Coca-Cola, Home Depot and roughly a dozen other Fortune 500 companies, the city offers a range of job opportunities. And the cost of living is pretty cheap — less than half the cost of Manhattan — with much warmer weather (well… except for this winter).

Tampa, Fla.

  • Median income: $56,800
  • Median home price: $129,000
  • Home price growth forecast : 6.5%

Beaches, boating and baseball are among some of the top reasons people come to Tampa, which is a newcomer to the top cities list. Several Major League Baseball teams come here for Spring training and MacDill Air Force Base has long been one of the biggest employers in the area…

CNNMONEY – http://www.cnn.com

 

 

 

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Rental Property Depreciation…

Tax Savings: Rental Property Depreciation Explained AUTHOR:

One reason you might consider investing in rental properties is to save money on federal income taxes. While this may be true, you should fully understand how rental properties and taxes work in order to determine whether you will save money from your rental property ownership.

If you’re already an investment property owner or are thinking about becoming a landlord, here’s a refresher on how the depreciation expense could help you maximize your tax savings.

The basics

In doing your annual 1040 federal income tax return, you’ll record your rent and all expenses on a Schedule E form. The net amount of gain or (loss) is then recorded on your 1040 form and can shield your income from taxes if you had a loss. One of the bigger expenses on most rental property owners’ Schedule E is something called depreciation. Here’s how it works.

When you own property, each year you write off costs for money you expend where the cost is a one-year expense, such as gardening, general maintenance, repairs and HOA fees. But what if the cost is for an improvement such as a new kitchen or new sidewalks? Because those costs have a useful life beyond one year, you must “capitalize” and depreciate those costs. That means you divide the total cost by the useful life of the improvement, and write off 1/nth of the cost per year. For example, you do $15,000 worth of driveway and sidewalks, with a 15-year useful life, so you can write off $1,000 per year ($15,000 divided by 15 years).

The biggest capital asset of any property is the actual purchase of the house. When you buy a rental property and will own it for longer than one year, you can depreciate the structure. First you must divide the purchase price of the property between the land and the building. You can use your tax assessor’s estimate of the cost of each of those components, an appraisal or an insurance agent’s estimate of the cost of the building. Either way, you can only depreciate the building, as theoretically the land portion of your purchase price is not “used” up and cannot be depreciated.

Crunching the numbers

Here’s an example: Let’s say you buy a single-family home for $200,000. The tax assessor’s estimate of the land value is $75,000, and the building value estimate is $125,000. Your depreciation expense that you take each year against rental income would be $125,000 divided by the IRS allowed 27.5 years of useful life (residential real estate) for a depreciation expense each year of $4,545. So thanks to that depreciation expense, you are saving (assuming you can use passive activity losses) $4,545 multiplied by your marginal tax rate (which is a topic for another day). This could be tax savings from $1,000 to $2,000 per year, just for the depreciation amount.

The calculation and write-off are pretty straightforward, but the actual tax savings amount gets a little more complicated. Many people flub this calculation from the start, so it’s best to find a licensed tax professional and start saving some money going forward.

 

Don’t Blame Tech Industry For High Home Prices…

Don't blame tech industry for tech hubs' high home prices

By:  | CNBC Real Estate Reporter
 

Housing in tech hubs is expensive. Just ask anyone in California. Home prices are in fact 82 percent higher in tech hubs than in other large metros, according to a report from Trulia. What is surprising, however, is that technology may not have contributed to that huge disparity, at least according to Trulia's chief economist Jed Kolko, who sifted through Census data to make his arguments.

"Housing in tech hubs was expensive even before the modern Internet era," noted Kolko. "In 1990, median price per square foot was 52 percent higher in tech hubs than in other large metros."

Powerfocusfotografie | Flickr | Getty Images
Victorian houses with San Francisco skyline.

So the tech industry didn't push prices higher. It was drawn to places that were already expensive. This may have been because these areas had major research universities, technically skilled workers, computer manufacturing industries or nice climates. Kolko points out that the year-over-year increase in home prices in tech hubs is actually in line with, not ahead of, the national trend; that is, after one accounts for the local severity of the housing bust.

Looking 10 tech hubs—San Francisco, Oakland, San Diego and San Jose, Calif.; Seattle; Middlesex County, Mass.; Raleigh, N.C.; Bethesda, Md.; Austin, Texas; and Washington, D.C.—the average price gain in 2013 was 13.4 percent from 2012. Compare that to an 11.4 percent gain for the 90 other large metros. The gap, Kolko argued, has to do with fact that tech hubs had steeper price declines during the housing crash but have fewer homes stuck in foreclosure today. If you adjust for that, the gap disappears.

(Read moreAll-cash offers crushing first-time homebuyers)

Still, there has been growing animosity, in San Francisco especially, that the influx of workers from Google has made the city increasingly unaffordable. Affordability actually varies pretty widely among the top 10 tech hubs. Just 14 percent of homes in San Francisco are considered affordable (based on median metro household income) compared with 60 percent in Raleigh, Bethesda and Washington, notes the Trulia report.

The reason San Francisco is so expensive may not be the high-paid tech workers, but a far more old-fashioned scenario: too little supply amid high demand.

(Read moreCold weather puts chill on home sales)

"Since 1990, there have been just 117 new housing units permitted per 1,000 housing units that existed in 1990 in San Francisco," Kolko said. "That's the lowest of the 10 tech hubs and among the lowest of all the 100 largest metros, even with the recent San Francisco construction boom."

Other tech hubs, like Raleigh and Austin, have 10 and eight times as much construction, respectively. The Bay Area's tough geography and regulatory environment have pushed development prices higher, limiting construction.