Lately every home I bid on has been getting mulitple bids and going over asking. And they're  not all REOs, in fact the last two were regular sales in Newark, CA.

I bid on a duet in Newark recently and it got 7 offers, and looks to have went over asking, which was $25k over the last closed of the same unit. It's nuts to chase up a house in this environment.

Also a entry level detached home in Newark got 33 offers with the high about $50k over asking. Also nuts. Again these were regular transactions.

Yes interest rates are low, and prices have come down, but the lack on inventory in Fremont, Newark, and Union City is temporary is making buyers behave irrationally. Similar to how they behaved in 2003-2005.

More homes will be coming on the market, especially in the low end, so be patient. Don't Panic!!!

There will be plenty of homes for everyone to get into at  reasonable price.

A client I worked with this last weekend, got me to thinking about how I should look at this problem. It's all going to boil down to what you think will happen with:

• Your income stream (job security, ability to get another job, if your company decides it needs to downsize, etc.)
  
• Mortgage Interest Rates
  
• Property Values

Obviously, renting is the safer, securer option for you right now, but the benefit of owning is that you fix your housing costs (since a 30 yr mortgage is major component of your home ownership costs, taxes are limited to increasing at 2% (California's Proposition 13), and insurance rates have actually come down the last 2 years).

I don't think pricing will move up the next year. However we don't know where interests maybe. One concern out there is that interest rates will be higher in the future because of money the government is printing right now will cause inflation.

So the big benefit of buying today is that rates are low, and pricing is also very good. Take a look at Table 1

Table 1 - Impact to Monthly Mortgage with 1% increases to the Interest Rate

 Today you can get a rate in the low 5%. At 5.25% your monthly mortgage would be $1,987.93. If rates increased by 1% in the future, and your monthly pmt would increase by $361/month or 18% over today's rate. Column 3 assumes that rates increases by 2% in the future, in which case your monthly payment increases by $468/mth or 23.5% over the rate offered today.

To see how much home prices would have to drop if rates were to increase to keep you at parity, look at Table 2.

Table 2 - Drop in Home Prices required to Offset a 1% increase to the Interest Rate

So in this example home prices would need to drop 10% or 38,000 to keep the mortgage pmt the same you would get by buying today at $360,000 at a 5.25% rate.

I hadn't done this calculation until just now, but it is interesting. I do believe that rates will rise in the future by a 1% because of inflation, however, I'm less certain that home prices will drop another 10%. It's all going to boil down to how bad this recession becomes. If the stimulus kicks in and American ingenuity comes into play like it did after the dot=com bubble collapsed, then don't be surprised if these media outlets all of a sudden start writing about how GDP growth and job gains.

Hope you find this information useful. Good luck in your home buying!

Sunil Sethi
http://www.sunilsethi.com/

Debt Relief Income Exempt from California State Income Tax:

This will be welcome relief for those taxpayers who had relief of debt in 2007 & 2008. If you've already filed your tax return, there are options to file an amended return. Given that the federal provisions were recently extended to 2012, California legislatures are being short sighted, and creating unnecessary anxiety for taxpayers who will be recognizing relief of debt from 2009 to 2012. Details on Senate Bill 1055

summary:

The California mortgage forgiveness debt relief law is effective immediately. It is similar to federal law, but with important differences.

The California law covers qualified debt forgiven in 2007 and 2008, and it:

• Limits the amount of qualified principal residence indebtedness to $800,000 for taxpayers who file as married/registered domestic partners (RDP) filing jointly, single, head of household, or widow/widower, and to $400,000 for taxpayers who file as married/RDP filing separately.
• Limits debt relief to $250,000 for taxpayers who file as married/RDP filing jointly, single, head of household, or widow/widower, and to $125,000 for taxpayers who file as married/RDP filing separately.

The federal law covers qualified debt forgiven from 2007 through 2012,¹ and it:

• Limits the amount of qualified principal residence indebtedness to $2,000,000 for taxpayers who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for taxpayers who file as married filing separately.
• Does not limit the debt relief amount: it only limits the indebtedness amount used to calculate the debt relief amount.

Just saw this sent out by CAR:

DRE Can Discipline Licensee for Inflating BPOs:Beginning on January 1, 2009, the DRE can suspend or revoke a real estate license if the licensee generates an inaccurate opinion of value (Broker Price Opinion or BPO) for a short sale of residential real property to manipulate the lender to reject the short sale or to acquire a financial or business advantage, such as obtaining a listing agreement. This new rule aims to preclude a self-serving agent from inflating a BPO in hopes that the lender will reject the short sale, foreclose on the property, and give the BPO agent an REO listing. Senate Bill 1737.

I had no idea that agent's were behaving so unethically to get a listing. You'd think the bank would be smart enough to give the listing to an agent other than the one that did the BPO.  I thought all the fly-by-nighters had left the industry. I guess not. I hope the agent that just performed a BPO on my listing was honest.

Conforming Jumbo CHANGE on 12/1/08

 October 6, 2008


The maximum conforming-jumbo limit for California officially changes for Fannie and Freddie on 1/1/09 to $625,500, however just recently I've learned that the banks will not fund any loan over $729,750 after 12/1/08.

If you loan is greater than $625,500 and you can't pay it down before your lock expires, you should consider completing a refinance into a 30 yr fixed ASAP. It'll take at least 30 days to process the loan as the lines get longer, so start the process today.

Here are some pricing scenarios:

Scenario 1: $729,750 loan amount, Loan to Value 80%, FICO 720, on a no-closing cost 30 yr fixed:
Rate 6.625% APR 6.625%

Scenario 2: $729,750 loan amount, Loan to Value 75%, FICO 720, on a no-closing cost 30 yr fixed:
Rate 6.250% APR 6.250%

Scenario 3: $729,750 loan amount, Loan to Value 60%, FICO 700, on a no-closing cost 30 yr fixed:
Rate 6.125% APR 6.125%

Call me to discuss your scenario.

Remember rates are constantly changing, if you find something you like act on it.

-sunil

Title Insurance Bill Signed Into Law by Governor Schwarzenegger

I've read the press release on number of newsites but there's no meat in the press release. This is it:

"The bill provides the Department of Insurance with significant new power to regulate marketing practices in the title insurance industry. In particular, the bill creates the first program in the country to register and regulate title company sales representatives."

So I'm guessing the female reps will be forced to wear looser clothing and get breast reductions. And I assume the back rubs will go away as well. I'm sure in the end this will help reduce the cost of title insurance somehow.

Title Insurance Bill Signed Into Law by Governor Schwarzenegger

I've read the press release on number of newsites but there's no meat in the press release. This is it:

"The bill provides the Department of Insurance with significant new power to regulate marketing practices in the title insurance industry. In particular, the bill creates the first program in the country to register and regulate title company sales representatives."

So I'm guessing the female reps will be forced to wear looser clothing and get breast reductions. And I assume the back rubs will go away as well. I'm sure in the end this will help reduce the cost of title insurance somehow.

Title Insurance Bill Signed Into Law by Governor Schwarzenegger

I've read the press release on number of newsites but there's no meat in the press release. This is it:

"The bill provides the Department of Insurance with significant new power to regulate marketing practices in the title insurance industry. In particular, the bill creates the first program in the country to register and regulate title company sales representatives."

So I'm guessing the female reps will be forced to wear looser clothing and get breast reductions. And I assume the back rubs will go away as well. I'm sure in the end this will help reduce the cost of title insurance somehow.

I first read this story probably around 1988, and I've seen various versions of this but the message is the same. Most stories will end with "The Moral of the Story is..."


A Man lived by the side of the road...and sold hot dogs.
He was hard of hearing, so he had no radio. He had trouble with his eyes, so he had no newspaper. But he sold good hot dogs.
He put up a sign on the highway, telling how good they were. He stood by the side of the road and cried, "Buy a hot dog, mister!" And People bought.
He increased his meat and bun order, and he bought a bigger stove to take care of his trade. He got his son home from college to help him. But then something happened. His son said, "Father, haven't you been listening to the radio? There's a big Depression on. The international situation is terrible, and the domestic situation is even worse."
Whereupon the father thought, "Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know." So, the father cut down on the bun order, took down his advertising sign, and no longer bothered to stand on the highway to sell hot dogs.
His hot dog sales fell almost overnight. "You were right, son", the father said to the boy. "We are certainly in the middle of a Great Depression."


So what's the moral of the story:
a. never listen to what the media says about the economy
b. never listen to someone whose been to college
c. your beliefs, create your reality

Today when I tell people I do real estate, they ask me, "so are you doing okay?" And I tell them, I'm doing great. I advised my clients with the same care I would give to my children, parents, and other family members in buying, selling or financing their property. I err on side of being cautious and I keep a positive attitude since I know tomorrow will be better than today. As a result, my continue to get high-quality referrals.

Senate Approves $18B for Renewable-Energy Tax Credits

 highlights are:


AMT Patch. Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT. Current law also does not allow personal credits against the AMT. At the end of last year, H.R. 3996 increased the exemptions to $44,350 and $66,250, respectively, and allowed the personal credits against the AMT to hold the number of taxpayers subject to the AMT at bay. The provision expired December 31, 2007. The proposal increases the exemption amounts to $46,200 (individuals) and $69,950 (married filing jointly) for 2008. The proposal will also allow the personal credits against the AMT. The estimated cost of this proposal is $61.817 billion over ten years.


Qualified Tuition Deduction. The Economic Growth and Tax Relief Reconciliation Act
(EGTRRA) created an above-the-line tax deduction for qualified higher education expenses. The maximum deduction was $4,000 for taxpayers with AGI of $65,000 or less ($130,000 for joint returns) or $2,000 for taxpayers with AGI of $80,000 or less ($160,000 for joint returns). This deduction expired on December 31, 2007. The proposal would extend the deduction to the end of 2009. The estimated cost of this proposal is $5.333 billion over ten years.


Additional Standard Deduction for Real Property Taxes. The Housing and Economic
Recovery Act of 2008 added a real property tax calculation to the standard deduction for
taxpayers who do not itemize. The real property tax deduction is the lesser of the amount
allowable as a deduction of State and local and foreign real property taxes, or $500 ($1,000 in the case of a joint return). The provision expires at the end of 2008. The proposal extends the provision to the end of 2009. The proposal is effective on the date of enactment. The estimated cost of the proposal is $1.495 billion over ten years.


Enhanced Charitable Deduction for Qualified Computer Contributions. The bill would extend for two years, through 2009, a provision that encourages businesses to contribute
computer equipment and software to elementary, secondary, and postsecondary schools by allowing an enhanced deduction for such contributions. The proposal is effective for
contributions made during taxable years beginning after December 31, 2007. The estimated cost of this proposal is $356 million over ten years.


Child Tax Credit. Currently, a taxpayer receives $1,000 tax credit for each qualifying child
under the age of 17. If the amount of a taxpayer's child tax credit is greater than the amount of the taxpayer's income tax, the taxpayer may receive a refund if the income threshold is met. EGTRRA set the income threshold for child tax credit refundability at $10,000 (indexed). The threshold for 2008 is $12,050. The proposal lowers the refundable threshold for the child tax credit to $8,500 for the 2008 tax year. The proposal is effective for tax years beginning after December 31, 2007. The estimated cost of the proposal is $3.129 billion over ten years.


Modification of Penalty on Understatement of Taxpayer's Liability by Tax Return
Preparer. The proposal changes the standards for imposition of the tax return preparer penalty. The preparer standard for undisclosed positions is reduced to "substantial authority." The preparer standard for disclosed positions is "reasonable basis." For tax shelters and reportable transactions to which section 6662A applies (i.e., listed transactions and reportable transactions with significant avoidance or evasion purposes), a tax return preparer is required to have a reasonable belief that such a transaction was more likely than not to be sustained on the merits. The proposal is effective for returns prepared after May 25, 2007. The estimated cost of the proposal is $22 million over ten years.


Expansion of Hope Scholarship and Lifetime Learning Credit. Current law allows a Hope Scholarship Credit in the first two years of post-secondary education equal to 100% 13 of the first $1,200 of qualified tuition and related expenses, and 50% of the next $1,200 for a maximum credit of $1,800. There is also a Lifetime Learning Credit available to students enrolled in one or more courses at the undergraduate or graduate level (whether or not pursuing a degree), equal to 20% of the first $10,000 in qualified tuition and related expenses. The proposal doubles the Hope Credit dollar amounts so the maximum credit would be $3,000, and doubles the Lifetime Learning Credit percentage from 20% to 40%, for a maximum Lifetime Learning Credit of $4,000 for students attending undergraduate or graduate institutions in the Midwestern disaster area. Room, board, books and fees would also be considered qualified expenses. This proposal applies to tax years 2008 and 2009. The estimated revenue loss of this proposal is $121 million over ten years.


Plug-in Electric Drive Vehicle Credit. The bill establishes a new credit for plug-in electric drive vehicles. The credit for passenger vehicles and light trucks ranges from $2500 to $7500. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the total number of qualified plug-in electric drive vehicles sold in the U.S. exceeds 250,000. The credit is available against the alternative minimum tax (AMT). The estimated cost of this proposal is $758 million over 10 years.


Bicycle Commuters. The bill allows employers to provide employees who commute to work by bicycle limited fringe benefits to offset the costs of such commuting (e.g., storage). The estimated cost of this proposal is $10 million over 10 years.