Aaron Cullen - Brokers Inc.

The "New and Improved" Home Buyer Tax Credit has arrived:  This time around, the gift from the government is broader, easier to qualify for and is extended to current/repeat home owners.  If you are thinking of buying a home, and would like some free money, here is what you need to know:  Current Home Owners - $6,500 Tax Credit:  If you have owned and lived in a home for at least five consecutive years during any of the last eight years, you could qualify.  Even if you sold your home 2 ½ years ago, as long as you were living in that home for five straight years, prior to the sale, you could qualify.  You could have sold the home or rented it out, does not matter, as the use of the home after you moved out does not matter.  First Time Home Buyers - $8,000 Tax Credit:  If you have not owned a home during the past three years, by definition, you are a First Time Home Buyer.  Buy a home and you may be eligible for the cash!  Fine-print:  You must buy a home, or have a binding contract in place by 4/30/2010, you must be over 18 years old, you cannot purchase from a relative and you must stay in the home for three years, or pay the money back.  There are other details and income limits, so contact me if you would like to learn more.  Speculation is, the breadth of this program will put a bottom in housing.

Home of the Month:  I am selling 120 Winterstein Drive in Folsom.  1,472 square feet, 3 beds, 2 full baths, 3-car garage on almost .18 acre lot.  This home is a short-sale and will be an amazing deal for the right buyer.  Asking $264,000.  Call me for details or an appt!

Regional Snapshot:  The attempt at a housing recovery in the Sacramento Region continues to bounce along what my well be the bottom.  The average home price rose for the 7th consecutive month, with that number having risen 10% since bottoming in March of 2009.  Year-over-year (10/08-10/09), the total number of home sales dropped 18%, bank owned home sales dropped 53% and short sales rose by 66%.  One of the biggest keys to our region's recovery is happening... More and more short sales are closing escrow!

Folsom:   The impact of the original First Time Home Buyer Program's expiration was felt in October.  Buyers rushed to get into homes, while sellers fretted about getting their homes sold before the November 30th expiration date of the original program.  The good news:  Folsom's 70 homes sales were the most we have seen since July of 2008, and year-over-year, home sales rose 10%.  The bad news:  Folsom's average sales price dropped to $378,000, its lowest level since 2004.  Market Direction:  Homes sales are up and inventories are tight, but the average dollar per square foot ($180) and the average sales price ($378k) have yet to stabilize.

El Dorado Hills:  EDH felt the impact of The First Time Home Buyer Program as well.  Good news:  The number of sales rose to 55, a 17% year-over-year increase.  However, with "First Timers" doing much of the buying, the average sales price ($454k) and dollars per sq. foot ($156), both dropped to levels not seen since before the housing boom began.  One bright spot was a 160% increase in closed short sales.

More good news for consumers, and the housing market recovery!  Following the Senate's favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers.  That number is expected to increase dramatically in the months ahead with this new legislation in place. 

FHA Loan Volume is Soaring:  In 2007, the number of government-backed FHA loans issued in the Sacramento Region was 649.  In 2008, this number soared to 8,998 loans.  In 2009, this number will increase again.  With this in mind, I looked back at all of the transactions I have been involved in, in 2009, and found 67% of the buyers used FHA loans. FHA loans are primarily used by people who can't afford a big down payment, or have credit score issues.  FHA buyers are only required to make a down payment equal to 3.50% of the purchase price, and can receive credits/gifts from the seller to assist with paying part or all of their closing costs.  With the credit market shot, most conventional loans now require at least 10 percent down.  FHA Loans are Making a Difference: In light of the housing down-turn, there are many existing home owners with growing families and/or incomes who would like to get a great deal while upsizing in this down market. Many of these would be buyers are well qualified with 2+ years of work history, excellent credit scores and great income. Their weakness?  By the time they sell their existing home, and pay off their existing loan(s), there is little or no money left over for the down payment on their home purchase.  This is where the FHA loan steps in, allowing these families the buy their dream home with total out of pocket costs as low as 3.50% of the purchase price.  FHA loans can also be used for refinancing homes that have little equity in them.  In Sacramento and El Dorado Counties, the maximum loan amount allowed with FHA loans is $580,000. If you want to know more about FHA loans, I don't originate them, but I'd be happy to answer your questions.

Deal of the Month:  I am selling a home at 988 Patrick Circle in Folsom.  2,750 square feet, 4 beds, 3 full baths, 3-car garage on almost .20 acre lot.  This meticulous home is in turn-key, move-in condition. Asking $450k (only $163 per square foot).  Call me for details!

Regional Snapshot:  The average home price in Sacramento County rose for the 6th consecutive month. The number of bank owned home sales fell for the 6th consecutive month to 715 units, their lowest level since March of 2008.  The first time home buyer tax credit, FHA loans and low interest rates continue to be the right mix to keep the housing market going in the right direction.

Folsom:  Folsom housing statistics continue to kick along what appears to be the bottom.  The average home sales price rose to $395k while the average dollars per square foot held steady at $183.  The biggest quirk in the market is that the total number of active short sales (112), when added to the number of active bank owned homes (25) added up to 53% of all homes for sale (258).  This is the first time in this housing downturn that active distressed home listings has exceeded 50% of available homes. No doubt this continues to erroneously skew home buyer perception as to home values and is causing further angst for home sellers.

El Dorado Hills:  Much like Folsom, September was a ho-hum month for EDH.  The only statistics that stood out were the avg. home price got back above half-a-million to $509k and the avg. dollars per square foot got back up to $168 (highest level since Feb '09).  The number of active Bank owned homes and short sales varied marginally and the banks still are not allowing short sales to close escrow.

In an effort to off-set last year's fincial meltdown and the ensuing recession, the current administration created a tax credit of up to $8,000 for certain first-time home buyers in the $787 billion Economic Stimulus Package that was passed in February, 2009.  Through this program, you are eligible to receive an $8,000 tax credit when you purchase a principal residence if you have an adjusted gross income of $75,000 or less (or $150,000 for married couples), you have not owned a home during the three years leading up to the purchase, and, you close escrow on your purchase prior to November 30, 2009.

Translation: Under the current First-Time Home Buyer Tax Credit program, if you would like the opportunity to get an $8,000 gift from the Federal Government, you have 71 days left to get pre-approved for a loan, find a home you would like to purchase, negotiate the contract, complete all the inspections and close escrow.  The clock is ticking... Now is the time to take action!

Will Congress and our President allow this program to expire? Will it be extended? Will it be replaced by a different program?  At this point, the answer is a resounding "Who knows?"  If you want to move forward with any certainty, close escrow on your home purchase by November 30, 2009, meet the criteria outlined above, and you'll qualify for a juicy $8,000 gift from Uncle Sam.

-Aaron Cullen, Realtor, Broker, Owner Brokers Inc. Residential Real Estate

Keep an Eye on December 1st, 2009:  The $8,000 tax credit currently available to First Time Home Buyers (defined as those who have not owned a home for the past three years) expires on December 1st, 2009.  Because it usually takes around 45 days to close escrow on a house after a contract is signed, buyers have very little time left to act.  As of Tuesday, Sept. 15, there are only 76 days left before the credit ends.   There has been a recent push, to get Congress to either extend the program, or create a new program that would be available to all home buyers.  The National Association of Realtors points out the current program brought 1.2 million new buyers into the market.  The NAR's concern is, the recent buying frenzy will dry up once the tax credit expires.  Analysts argue that without the incentive, the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.  As you will see below, August sales dropped off considerably in Folsom and El Dorado Hills.

Deal of the Month:  I am selling a home at 120 Winterstein Drive in Folsom.  1,467 square feet, 3 beds, 2 baths, pool, 3-car garage.  Needs some work, but a great starter home.  Asking $268,998.  OPEN HOUSE Sunday 9/20/09 from Noon to 4pm. Call me for details!

Regional Snapshot:  The good news:  The number of homes for sale in Sacramento County dropped again to 5,469 units.  This is 29% below the peak in October of 2008.  The number of bank owned home sales fell for the 5th consecutive month to 774 units, 49% below the peak in October of 2008.  The average sales price rose for the 5th consecutive month.  The bad news:  For the first time in 2009, the number of home sales dropped in Sacramento County.  From July to August, the sales fell by 12% from 1,854 units to 1,636 units.  Hopefully this has to do with the seasonality of the housing market and the numbers will rebound in the coming months.  Folsom and El Dorado Hills were not immune to the drop in sales with both experiencing a big drop in sales during August.

Folsom:  It appears the local focus shifted from home buying to getting the kids back into school and to soccer practice during August.  Although the average dollars per square foot of sold homes rebounded from $164 in July, back up to $185 in August, the number of sales dropped by 24% to 53 homes and the average sales price slipped to $386,000.   Of the 53 home sales, 12 were bank owned and 8 were short sales, making 38% of total sales distressed homes.

El Dorado Hills:  After having its best month in more than a year with 73 home sales in July, El Dorado Hills fell on hard times in August with sales falling 47% to only 39.  Of the 39 sales, 10 were bank owned homes and 6 were short sales, making 41% of the sales distressed homes. The average dollars per square foot held steady at $161 while the average home sales price dropped to $492,000.  Serrano continued to be "on sale" in all price points with high inventory, providing great deals for the El Dorado Hills home buyer.

Facing a Foreclosure in Folsom, CA? 

At the end of July in 2009, there were 285 homes for sale in Folsom, CA.  The breakdown: 171 "Non-Distressed" listings, 97 "Short Sale" listings and 17 "Bank Owned" listings.  In the same month, there were 48 Non-Distressed sales, 5 Short Sales and 20 Bank Owned sales that closed escrow.  What does this tell us?  28% of the Non-Distressed inventory sold, 5% of the Short Sale inventory sold and 117% of the Bank Owned inventory sold.  Bottom line: If you get foreclosed on, the bank will unload your home quick and cheap.  If you want to avoid foreclosure with a short sale, it can be done, but time is of the essence and there is no margin for error.  If you hire an experienced short sale specialist, the odds of your success will increase exponentially!

Short Sale or Foreclosure: Which is the Better Option?

Losing your home to bank foreclosure, resulting from your inability to make your monthly mortgage payment(s) is one of life's most challenging experiences.  Foreclosure is also an event that will impact your credit score for years to come.  Foreclosures often result from the unexpected: a major accident, serious illness, death of co-owner, divorce, job loss, or more and more often as the result of a resetting interest only or adjustable rate mortgage.  If you are facing any of the above it is better to understand your options and take action, rather than standing idly bye and waiting for the foreclosure to take place.

Foreclosure is the worst of your available options

As most people know, the result of a foreclosure is the bank will take your home.  Depending upon the circumstances and the state you live in, the lender can also get a judgment against you for the cost of the foreclosure and the arrearages you owe.  The foreclosure will ruin your credit score for many years to come, and make obtaining any other type of credit very difficult.  If at all possible, you want to avoid going through a foreclosure.

When foreclosure seems inevitable, consider a Short Sale

Banks first choice is rarely to foreclose.  Typically, it is their last option in an effort make the best they can out of a bad situation.  For homeowners who have found themselves in dire straights financially, a popular option is to pursue a short sale.  In a short sale, you sell your home for less money than what is owed on it.  The biggest challenge is getting your bank/lender to agree to the short sale.  On the one hand, they don't want to foreclose and take ownership of your home, but on the other, they aren't thrilled about forgiving the debt you owe and passing the loss to their share holders and other investors.  If you are considering a short sale, your best course of action is to pursue it the moment you realize you are falling behind on your mortgage payments and you are not willing and/or able make any more payments.  Currently in California, it takes a bank/lender a minimum of seven month to foreclose.  If you move quickly on doing a short sale, the bank/lender will have a lot to lose if they don't work with you.  If you wait until 5-6 months have past, after skipping your first payment, it is unlikely you will have success with a short sale.

The downside to a Short Sale

Although a short sale will prevent a foreclosure, it will still have a negative impact on your credit score, often times lowering it by hundreds of points.  This stigma can eventually be overcome and may dissipate much quicker than a foreclosure.  If possible, keep some credit cards open, use them regularly and responsibly and pay them off every month.  The next area of concern is the "forgiveness of debt."  In years past, even though you never saw a dime of it, the IRS and the state tax collectors would consider the difference between the mortgage balance and the home sale proceeds from the short sale to be taxable income.  The Mortgage Forgiveness Debt Relief Act of 2007 put a moratorium on federal taxes on short sales through 2012, but laws change regularly, and it is always a good idea to consult your tax planner/advisor prior to pursuing a short sale.

After considering your options, do everything you can to avoid foreclosure

Going through a short sale won't be pleasant and will take some effort, but it will be a better alternative than a foreclosure.  When you realize you are in trouble and don't know where to turn, don't slip into denial and hope the bank/lender will go away.  Instead, consider whether you will qualify for a short sale and approach your bank/lender with an offer from an interested buyer before you are out of options.

Ready for a Short Sale? Don't attempt to do it alone

For a number of reasons, most attempted short sales are unsuccessful.  The banks/lenders have specific paperwork and guidelines that must be understood and adhered to.  Each bank/lender is different and there is no single or broad approach that works with each.  The idea of losing your home to foreclosure is scary and a short sale can lessen the blow, but it must be done in and efficient and timely manner.

When selecting a real estate agent to assist you, you need one that has years and years of experience in the business and knows how to close real estate transactions.  More and more frequently, these experienced agents have realized that the most efficient way to effectively list and close a short sale is to partner with a professional "short sale negotiating firm" that will be the go-between the Realtor and the Bank/Lender.  In this process, the real estate agent focuses on their area of specialty: listing, marketing, negotiating and closing the sale, and the short sale negotiating firm: collecting documents from the seller, compiling the short sale package and calling/emailing the bank's asset manager on a daily basis until an agreement with the bank is reached.  Remember, you aren't going to get a dime out of the short sale...  Your job is to hire professional(s) who will get the short sale done while keeping what's left of your money in your pocket.

Hire an experienced Short Sale team!

If you live in the Sacramento Area and are considering a short sale, I encourage you to consider my services.  I am a licensed Realtor / broker / agent and have been serving California since 1992.  I am the founder and owner of Brokers Inc. Residential Real Estateand I have partnered with a couple of Short Sale Negotiating Firms that specialize in closing short sales.  If you live in other areas of California and would like a referral to an experienced agent in your area, email me and I'll send you the names of a couple of reputable real estate agents to help you out.  If you are located in the Sacramento Area, give me a call and I'll come meet with you today!

The Pace of U.S. Home Sales is Fastest in Two Years:  Sales of previously owned U.S. homes jumped 7.2 percent in July to mark the fastest sales pace in nearly two years in a strong sign that housing is pulling out of a three-year slump.  Sales in July rose for the fourth straight month to hit an annual rate of 5.24 million units, the highest rate since August 2007, the National Association of Realtors said, beating market expectations for a 5 million unit pace. Sales in June had been at a 4.89 million pace.  July's increase was the largest monthly gain since the series started in 1999. The last time sales rose for four consecutive months was in June 2004, the NAR said.  The Realtors group heralded the July sales as a turning point, while some observers offered a more cautious view.  "The housing market has decisively turned for the better. We are bouncing back," NAR chief economist Lawrence Yun told reporters.  "Overall, these figures may suggest that the recovery in housing activity is gathering pace, but there is a long way to go yet," said Paul Dales, U.S. economist at Capital Economics in Toronto. U.S. Federal Reserve Chairman Ben Bernanke, speaking at a gathering of central bankers and top economists in Jackson Hole, Wyoming, said prospects for a resumption in global economic growth after a deep contraction looked good "in the near term. (courtesy of Reuters news feed 10/21/09)

Regional Snapshot: The inventory of homes for sale in Sacramento County peaked during the "dark days" of October in 2008 at 7,731. In July, 2009, the available inventory of homes for sale in Sacramento County dropped again to 5,626 homes, more than 2,000 housing units below the peak.  The number of home sales rose for the 7th consecutive month, closing out July with 1,854 sales.   The most interesting trend I am watching these days is the number of short sales available, relative to total active listings.  Of the 5,626 homes for sale in July, 3,331 were short sale listings, which was 59% of the total.  Add the 661 Bank Owned Homes to the equation and you had nearly 4,000 (71%) of the homes for sale in July being distressed homes. 

Folsom:  From a statistical standpoint, on the surface, July looked like a great month in Folsom.  There were 70 home sales (the best month since July of 2008)  and the supply of homes dropped to 3 months.  Taking a closer look, inventory rose again to 285 homes, and the average dollar generated per square foot dropped strongly from $184 the previous month to $164 in July.  This is a familiar tune being heard across the country, homes sales are up, along with "bang-for-the-buck" for home buyers.  Deals are abound...

El Dorado Hills:  El Dorado Hills had its best month in more than a year, with 73 home sales in July.  Inventory of homes for sale held steady with 352 at an average of $162 per square foot, while the average home sales price again dipped under $500k.  The number of active short sale listings rose to 128 and bank owned homes to 20, putting 45% of the homes for sale in the "distressed" category.

What difference does a year make?  All would-be home buyers, waiting for the market to bottom, should consider the following:  While it's true that the best environment home buyers have ever seen may have been from January to late May of this year, outstanding opportunities still exist for those who act soon. If you are planning to buy a home, there are important dates on the calendar that you need to take note of so you can act accordingly. These dates represent money-saving opportunities for consumers. 

We may never see rates this low again:  In response to the faltering economy in late 2008, the Federal Reserve announced they would start buying Mortgage Backed Securities (MBS). Immediately after this announcement, 30-yr. fixed rates plunged into the mid 4% range. What you need know is, this program by the "Fed" expires on 12/31/09.  With the Fed having bought up to 85% of the MBS since March, when the program expires, the rise in mortgage rates may be as dramatic as the drop this past November, returning to levels well above 6%.  

Want $8k for buying a home?  The $8,000 tax credit for first time home buyers (anyone who has not owned a home the past 3 years qualifies) is set to expire on November 30, 2009.  Buy a home and close escrow on December 1st, and you may have just lost $8k. 

Homes have never been more affordable:  The National Association of Realtors® keeps track of what is known as the "Home Affordability Index." The Home Affordability Index is arrived at as a function of both median home prices, available interest rates, and median family income. The index represents the amount of monthly income that is required to pay a mortgage payment. In 2005, approximately 23.3% of a family's monthly income was required to pay a mortgage payment. With falling home prices and interest rates, the percentage of monthly income required to pay a mortgage payment is now approximately 15%. This means that for a family at the median income level purchasing a home priced at the median income level, the monthly mortgage payment has declined nearly 36%. 

It is always easy to look back and identify times people should have acted, and this could well be one of those times people will look back and say, "Wow, I could have bought a home in 2009!"

Regional Snapshot:  Available inventory of homes for sale in Sacramento county dropped to 5,628 with 1,766 home sales last month.  Home buyers are now looking at only 3 months of inventory, which in a typical market would be termed a "sellers market." Of the 1766 sales, 963 were bank owned (55%), 219 were short sales (16%) and the average home sales price rose again to $201,457. 

Folsom:  Folsom closed out June with 60 home sales.  15 (25%) were bank owned sales and 12 (20%) were short sales, making distressed home sales 45% of the total volume.  The average home sales price was $383,000 with an average of $184 per square foot.  Folsom is now down to a 4.5 month supply of inventory.  Excluding short-sales, Folsom is down to a 3 month supply of inventory.

El Dorado Hills:  There were 55 home sales in EDH in June.  17 (31%) were bank owned and 5 (11%) were short-sales, making 42% distressed home sales.   The average sales price rose to $525k with an avg. of $161 per square foot.  Inventory is now at 6.4 months.

A client recently asked me, what is a "Short-Sale?"  A short-sale is a home for sale that is worth less than what is owed to the bank(s) on the loan(s). The home seller and the agent set the asking price "below market" to attract a buyer and get the home under contract quickly. They usually don't care what the home sells for because the seller is not getting any money from it, they are just trying to avoid foreclosure. Once an offer comes in, it is submitted to the bank(s) for review.  Typically, there is a 1st, 2nd and sometimes a 3rd loan on the home.  Since the home is usually worth less than the 1st, the 1st lender approves the sale, the 2nd and 3rd lenders aren't entitled to any money, so they say "no," and then they all argue about it for months on end until the 1st lender gets frustrated and forecloses.  At that point, the seller is gone, their credit ruined, the 2nd and/or 3rd lender gets nothing and the 1st lender unloads the house as a bank-owned home at a low price.  How do Short-Sales effect you?  The cheapest homes on the market are often times the short-sales.  And since they rarely sell, every market is flooded with inventory of low priced short-sales that are sitting on the market, rotting away, and creating the illusion that homes can be purchased cheaper than they really can, forcing non-distressed home owners to compete with them.  When a buyer comes along and wants to buy your home, they will point to 3 to 5 under-priced "active short-sale listings" and say your home is over priced.  The short sale system is one that rarely works and is bringing down the value of all our homes, plus feeding the supply of foreclosures.  Have you ever wondered why there are so many foreclosures?  Here is one piece of the puzzle:  Currently, there are 103 "short sale listings" (30% of inventory) in El Dorado Hills, and only 2 (1.9% of them) actually sold last month.

Regional Snapshot:  Available inventory of homes for sale in Sacramento county dropped to 5,666 with 1,694 home sales last month.  Home buyers are now looking at only 3.33 months of inventory, which in a typical market would be termed a "sellers market." Of the 1,694 sales, 1,100 were bank owned (65%), 219 were short sales (13%) and the average home sales price rose to $190,188. 

Folsom:  Folsom closed out April with 59 home sales.  18 (30%) were bank owned sales and 12 (20%) were short sales, making distressed home sales 51% of the total volume.  The average home sales price rose to $400k with an average of $184 per square foot.  Folsom is now down to a 4.4 month supply of inventory.  Excluding short-sales, Folsom is down to a 2.6 month supply of inventory.

El Dorado Hills:  EDH home sales continue to drag compared to Folsom.  It has a lot to do with the fact that homes cost more in EDH.  In April, there were 38 sales. 17 (45%) were bank owned and 2 (5%) were short-sales, making 50% distressed home sales.

Latest News and Topics of Interest:  The biggest news to develop in March was the long awaited arrival of lower interest rates.  For months I have referenced rumors and mortgage insider speculation regarding falling mortgage rates, and in March it finally came true.  March began with average 30 yr. fixed mortgage rates in the Western U.S. at 5.06% and by month's end they had dropped to 4.71% (both with about 1 point).  Since the keys to the housing recovery are low interest rates, fewer foreclosures and lower unemployment rates, and the last two are difficult to control, you can expect government intervention in the treasury markets to continue and mortgages to remain cheap for the foreseeable future.

Housing bottom looming?: Time will tell, but one of the interesting stories I have been following is the drop in available bank owned homes in Folsom.  Over the course of the past year, during any given month, there has been between 26-35 bank owned homes for sale in Folsom.  At the end of March, the number of bank owned homes had dropped to under 20.  If this trend continues, more and more home buyers will have to turn to "non-distressed" houses to buy their next home.  This would put upward pressure on prices.

Regional Snapshot:  1,734 homes sold in Sacramento County last month, a 160% increase in home sales when compared to March of 2008.  Of the 1,734 sales, 1,220 were bank owned (70%), 215 were short sales (12%) and the average home sales price was $187,686. 

Folsom:  Folsom closed out March with 51 home sales.  10 were bank owned sales and 14 were short sales, making distressed home sales 47% of the total volume.  The average home sales price was $391k with an average of $186 per square foot.  Folsom is down to a five month supply of inventory.

El Dorado Hills:  EDH home sales perked up a bit in March with 40 closed escrows.  19 of the sales were bank repo's and 6 were short sales, making distressed home sales 63% of the volume.  The average sales price rose to $580k with an avg. of $168 per sq. foot.