SCHWARZENEGGER SIGNS BILL AUTHORIZING $10K NEW HOME CREDIT

From the California Building Industry Association, here are FAQs about the new $10,000 tax credit for those who purchase new construction in the state:

How much is the state tax credit?

The state tax credit is for $10,000 or 5 percent of the purchase price of a newly built home, whichever is less. The home must be the principal residence of the buyer for at least two years following the purchase, and the sale must close between March 1, 2009 and March 1, 2010.

How does the tax credit work?

- A tax credit of up to $10,000 credit (five percent of home price or $10,000, whichever is less) for the purchase of a newly constructed, previously unoccupied home.

- Available March 1, 2009 and good until March 2010, or when funding authority runs out – whichever comes first ($100 million was allocated to program).

- Allocated by the state’s Franchise Tax Board (FTB) on a first-come, first-served basis (details still to be worked out).

- Paid out to home purchasers over three tax years in equal amounts (i.e. $3,300 for 2009, $3,300 for 2010, etc.)

- Purchasers must reside in the home for at least two years.

- There are no income limitations that have to be met by purchasers.

- There is no first-time homebuyer requirement.

- There is no repayment requirement (unless the purchaser sells, rents out, etc before two years expire).

What constitutes a purchase, for purposes of qualifying for a credit?

The FTB has determined that, for purposes of securing a homebuyer tax credit, a qualified “purchase” means close of escrow.

How does a customer obtain a tax credit?

The FTB has indicated that it will provide tax credit to buyers for escrow closings after March 1, 2009 until March 1, 2010, or until the statutorily authorized funding for the credit runs out, whichever occurs first. A buyer will receive a notice from the FTB following the close of escrow confirming the apportionment of a tax credit for that buyer’s purchase.

How will customers know if there are credits still available?

The FTB has promised to keep and publish – as often as daily – a running total. (That is, how much funding remains from the original $100 million set aside for the program.)

Will I receive the credit if I buy an existing home?

The credit is only for the purchase of a newly built home that has never been occupied.

How much money is available under the program?

The law limits the total amount of credits that can be claimed to $100 million. Credits will be allowed on a first-come, first-served basis. When the $100 million runs out, the state tax credit program is over.

Where can I go for more information about the tax credit and find out if I qualify?

Consult the FTB website www.ftb.ca.gov. The FTB is the agency responsible for administering the tax credit and will have information, including all necessary forms available on their site.

Can the credit be used in conjunction with the recently enacted federal tax credit?

Yes - The state homebuyer tax credit ($10,000) and the federal credit ($8,000) can be used together, but there are conditions that must be satisfied:

- The state homebuyer tax credit applies only to new, previously unoccupied homes.

- The federal tax credit is limited to first-time homebuyers, only.

- The federal tax credit is also limited to individuals with annual incomes of $75,000 ($150,000 for dual filers). Lower-valued credits are available to individuals with incomes up to $95,000 and $170,000, respectively. Consult the following website for more information on this and other aspects of the federal tax credit (www.federalhousingtaxcredit.com/).

- Both the state and the federal homebuyer tax credit require the purchaser to maintain occupancy of the home for a period of time following the purchase – two years for the state and three years for the federal credit. Both tax credits must be repaid if the purchaser fails to meet these occupancy requirements.

- To qualify for both: A homebuyer who qualifies for both credits (up to $18,000) must buy a new home; can't have owned one in the last three years; must have an individual annual income of $75,000 or less; and must live in the home for at least three years. Also important to remember regarding the use of both credits is that the state homebuyer tax credit is paid out over three years (i.e. $3,333 per year, based on a $10,000 credit) whereas the federal credit is a one-time tax benefit.

CHASE, FANNIE, FREDDIE, B OF A AMONG THOSE SUSPENDING FORECLOSURES

A number of leading banks, as well as federally-chartered mortgage giants Fannie Mae and Freddie Mac, have announced another moratorium on new foreclosures.

This is something we have several times since the end of last year, with different banks and servicers announcing a halt to foreclosures while waiting to see how the government pledges to address homeowners who are delinquent on their loans.

Whether it’s the government stepping in and buying “bad” loans, incentivizing workouts and short sales for lenders, or offering more bailout funds for banks that comply with the government’s mortgage lending and servicing guidelines, many banks have decided that foreclosing and selling homes for 70 cents on the dollar may not be the most cost effective approach.

We have already seen a significant drawdown of inventory over the past few months, with sales spiking by nearly 50% in California during December as buyers rolled back into the market to take advantage of the new affordability.

With an $8,000 federal tax credit to help first-time buyers now part of the equation, competition figures to only intensify among buyers at the entry level price points in our market.

It will be interesting to see how this plays out… as many banks seem to be playing a game of “wait and see” with the federal government, holding out for the best deal possible on their distressed assets.

FORECLOSURES CONTINUE TO DOMINATE RESALE MARKET

The San Diego Union Tribune reported this week that foreclosure sales accounted for 55% of all resale transactions in January, a record number that illustrates the high buyer demand for distressed properties.

The overall median price in San Diego was $280,000, down 34.1% from one year earlier and the first time since 2002 that the median price dipped below $300,000.

With median prices now below $300,000, the $8,000 first-time buyers tax credit being offered by the government is going to continue to pull first-time buyers (or longtime renters) into the market. I encourage you to look at your own prospecting and marketing strategies and make sure that they are speaking to this demographic group - they will continue to account for the lion's share of activity in 2009.

We're also starting to see more short sales actually get done - with the government putting increased pressure (and now offering incentives) for lenders to work with sellers, this is another opportunity to serve our market in a positive and beneficial way.

Over the next few weeks, we'll be sharing some tips on marketing to first-time buyers and short sellers in this space. Stay tuned...

AFFORDABILITY CONTINUES TO GROW

The California Association of Realtors reported this week that the percentage of households that could afford to buy an entry-level home in California stood at 59 percent in the fourth quarter of 2008, compared with 33 percent for the same period a year ago.

CAR's First-time Buyer Housing Affordability Index measures the percentage of households that can afford to purchase an entry-level home in California. The minimum household income needed to purchase an entry-level home at $248,030 in California in the fourth quarter of 2008 was $48,900, based on an adjustable interest rate of 6.02 percent and assuming a 10 percent down payment.

First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment, including taxes and insurance, was $1,630 for the fourth quarter of 2008. At $48,900, the minimum qualifying income was 42 percent lower than a year earlier when households needed $83,700 to qualify for a loan on an entry-level hold.

Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.

At 76 percent, the High Desert region was the most affordable area in the state. The San Luis Obispo County region was the least affordable in the state at 44 percent, followed by the Los Angeles County region at 46 percent.

A FINAL WORD (FOR NOW) ON THE STIMULUS BILL

Well, there was no lack of drama in Washington this week.

The House and Senate voted on Friday to approve the final version of the $787 billion (with a “b”) economic stimulus package that has been the talk of the country for the past month.

For housing in Southern California, there are two key components:

1) Restoration of the higher FHA loan limits for most of our region that were part of last year’s Housing Recovery bill signed by then-President Bush;

2) An $8,000 true tax credit (almost like a gift) for first-time buyers who purchase a home by December 1, 2009.

FHA began 2008 with a maximum loan limit of $362,790 in high cost areas like Orange County and San Diego, with a sliding scale rolling all the way down to a cap of $200,160 in the lowest cost markets.

Under the legislation passed last summer to spur the housing market, the FHA loan limit was temporarily boosted as high as $729,750 in high cost markets, a move which dramatically increased accessibility to affordable financing and allowed buyers to purchase homes with as little as 3% down through FHA.

As of January 1, 2009, the old, lower FHA loan limits returned, effectively pulling the plug on sellers and buyers in high cost markets like ours.

By restoring FHA loan limits to those outlined in the Housing Recovery bill from last year, buyers have MUCH easier access to financing on more higher cost properties. That’s a major victory that will absolutely help the Southern California housing market in 2009.

The tax credit provision was one of the most heavily lobbied and debated components of the economic stimulus package.

In short form, here’s how the tax credit idea evolved:

Last year’s Housing Recovery Act included a provision which offered a refundable, repayable $7,500 tax credit to first-time buyers who purchased a home between April 9, 2008 and June 30, 2009. The credit was limited to those who had not purchased a home in the past three years and actually served as more of an “interest free loan”, as the credit had to be paid back by the taxpayer in 15 installments of $500, beginning with the 2010 tax year.

The House version of the Economic Stimulus bill extended the existing credit out to the end of 2009, while the Senate’s version when much further, doubling the credit to $15,000 and making it available to all homebuyers purchasing a principal residence.

In the end, the committee which negotiates out the differences between the House and Senate drafts of the bill settled on $8,000 for first-time buyers, eliminating the repayment clause and extending the credit through December 1, 2009.

So, in summary, the tax credit provision remained only for first-time buyers, but was increased to $8,000, made non-repayable, and extended to December 1.

While some are disappointed that the full $15,000 tax credit did not end up in the final bill, the reality is that the new credit is larger and better than the old credit, and it will be around longer than in the original Housing Recovery bill from last year.

That’s good news, not just for buyers, but for sellers of entry-level homes who will now find more buyers eager to take advantage of a generous incentive.

In the end, these changes should give our market a good, solid dose of adrenaline. I am excited about the new opportunities that have been created and I know that buyers, sellers and those having difficulty staying in their homes will all benefit from this legislation.

With sales up 47.9% in California during December, buyers are already charging back into the market. These latest incentives should only help us further as we begin a demand-driven housing recovery.

FENCE SITTERS

I've heard about this family from more than a few agents... I hope the $8,000 first-time buyers tax credit helps them.

RULE CHANGE FAVORS INVESTORS

If you read what’s being said on the many forums and posting boards online about the housing market, you hear a lot of different things about real estate investors.

Some say investors over-speculated in our market, causing its decline. Others say investors are an important part of our solution, since they have the expertise and stomach to purchase and rehab distressed bank-owned inventory that is otherwise passed by.

In response to the first line of thinking, Fannie Mae slapped a four-property restriction on investors in December that caused outrage in the investor market. Thinking that too much investing was a bad thing, regulators said that Fannie would not purchase any loans made to investors with more than four homes in their portfolio.

Last week, Fannie reversed itself, sort of.

At the urging of NAR, investor groups and even local community activists, Fannie Mae revised its policy last week which opens the doors for investors to own up to 10 properties, but with stricter qualifying guidelines after the fourth property.

Now, for homes five through 10, borrowers must have a credit score of at least 720. The maximum loan-to-value ratio is 70% or 75%, depending on specified criteria. Borrowers may not have any history of bankruptcy or foreclosure in the past 7 years, or any mortgage delinquencies of 30 days or greater within the past 12 months. Reserve and other requirements also apply.

It’s a good “middle ground” step to get investors back into market while ensuring there isn’t excessive speculation.

The recovery that will take place in our market is going to be demand driven, and that demand is going to come from discounted prices, tax incentives and a committed “buy-in” from the investor community.

Fannie did the right thing in welcoming investors back into the fold.

CENTURY 21 ONLINE LISTING DISTRIBUTION UPDATE

I know from talking with many of you that we have more listings coming online in the next few weeks as people look are looking to the Stimulus Package in Washington to bring more buyers back into the market.

Now, more than ever, marketing matters.

Toward that end, I wanted to remind you that Century21.com distributes your listings automatically to Google, Trulia, Zillow, Yahoo! Real Estate, Homefinder, AOL Real Estate, Homes.com, OpenHouses.com, and listings above $500,000 are picked up on WallStreetJournal.com.

Of course, we also have IDX agreements that allow your listings to be promoted on the sites of competing brokerages as long as they abide by IDX guidelines.

Just a few years ago, many agents had to manually upload their properties onto many of these sites. Today, thanks to CENTURY 21, your listings are spread far and wide as soon as they are entered into the CREST system.

Please make sure your clients know that no one can do more to promote their homes online than CENTURY 21. Now more than ever, the brand matters.

INTRODUCING "TEAM 21"

WHITE HOUSE ANNOUNCES WHAT STIMULUS BILL WOULD MEAN TO CALIFORNIA

In an effort to win public support for the massive stimulus bill being debated in the Senate, the White House announced today what potential benefits would exist for each state in the country if the bill becomes law.

Here's what the Obama administration envisions for California, according to a media release from the White House:

• -- Creating or saving 421,000 jobs over the next two years. Jobs created will be in a range of industries from clean energy to health care, with over 90% in the private sector.

• -- Providing a "making work pay" tax cut of up to $1,000 for 12,420,000 workers and their families. The plan will make a down payment on the President's Making Work Pay tax cut for 95% of workers and their families, designed to pay out immediately into workers' paychecks.

• -- Making 522,000 families eligible for a new American Opportunity Tax Credit to make college affordable. By creating a new $2,500 partially refundable tax credit for four years of college, this plan will give 3.8 million families nationwide - and 522,000 families in California - new assistance to put college within their reach.

• -- Offering an additional $100 per month in unemployment insurance benefits to 2,395,000 workers in California who have lost their jobs in this recession, and providing extended unemployment benefits to an additional 506,000 laid-off workers.

• -- Providing funding sufficient to modernize at least 1,208 schools in California so our children have the labs, classrooms and libraries they need to compete in the 21st century economy.

So what will this mean to the California economy? Is it enough? Is it too little? Is it inflationary? I'd love to know your thoughts...

GOLD TUESDAYS

The CENTURY 21 brand is the most powerful name in real estate, and in 2009, I want to help our agents leverage the power of the brand to their fullest advantage.

That’s why we’re starting “GOLD TUESDAYS”, a new theme within our company that will emphasize the power of the CENTURY 21 brand. You’ll see more gold in our offices… starting with our trademark gold jackets.

On Tuesdays, we’ll be encouraging our staff, management and agents to wear their gold proudly, and to make a statement that says were accessible, available and committed to our clients.

What would you like to see on “GOLD TUESDAYS”? Drop me a note and let me know – I’d love to hear your feedback!