Tax credit for home purchase could rise

By Stephanie Armour, USA TODAY

Lawmakers and businesses are calling for expansion of a tax credit for first-time home buyers that has helped spark home sales in an otherwise dismal real estate market.

With the tax credit scheduled to expire in fall, some business groups say the amount of the credit, now capped at $8,000, should be raised to $15,000 and applied to anyone who buys a home.

First-time buyers make up a hefty 40% of home purchases, according to the National Association of Realtors (NAR), which is about 5 percentage points higher than the historical average.

The credit, introduced in July 2008, was expanded in February as part of the economic stimulus package. The proposals may face headwinds amid growing public criticism of government spending to rescue the economy and the widening budget deficit.

Some economists say a tax benefit is vital to spur home buying and help stabilize prices.

"I'm fairly confident that (Congress) will extend the tax credit, because it is so important that housing come back," says Bernard Baumohl, an economist at the Economic Outlook Group. "But raising the tax credit will be difficult because it reduces taxes even more."

The White House had no immediate comment Sunday.

Current proposals:

A Senate bill to expand the tax credit to $15,000 for any home buyer regardless of income was introduced this month by Sen. Johnny Isakson, R-Ga. It is co-sponsored by Senate Banking Committee Chairman Chris Dodd, D-Conn.

"It would go a long way toward inducing trade-up buyers into the market," says Lawrence Yun, chief economist at the NAR.

A House bill to keep the $8,000 credit in place until June 2010 and expand it to all home buyers was introduced last month by Rep. Kenny Marchant, R-Texas. It also would provide a $3,000 credit to homeowners who refinance.

Another bill in the House, introduced by Rep. Eddie Bernice Johnson, D-Texas, would extend the credit to all home buyers through 2010.

The Business Roundtable, a consortium of CEOs from large companies, urged Congress this month to expand the tax credit to $15,000 and make all home buyers eligible.

"The issue is how do we stimulate the move-up market, and that's essential for the economy," says Richard Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker, Sotheby's International Realty and ERA.

"I think it's going to be a bipartisan effort," Smith says. "The issue is how to pay for it."

The current tax credit does not apply to singles earning more than $95,000 a year and couples who earn more than $170,000. Some business leaders want the income caps eliminated.

Buyers do not have to repay the tax credit if they occupy the home for three years or more.

"A lot of people are taking advantage of it," says David Thomas, a Realtor in Washington, D.C., who adds that expanding the credit would boost the market. "That would be a fantastic idea, to enhance and expand the incentives."

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Cheap homes have Inland area leading Southern California in sales

Courtesy PE.com

Riverside and San Bernardino counties led Southern California in home sales last month, with bargain-priced foreclosures heating up sales to record levels in some communities.

Despite strong demand from first-time buyers and investors, the two counties also saw the region's greatest drop in median home prices.

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Real estate swings have affected minorities more than whites, study shows

Minorities bought homes at a faster pace than whites from 1995 to 2005, a Pew report says. But in recent years, declines in homeownership among blacks and Latinos were especially severe.

By Tiffany Hsu

The roller-coaster ride of the real estate market over the last 15 years has soared higher and plunged deeper for minorities nationwide than it has for whites, according to a study of homeownership released Tuesday.

The declines in homeownership among African Americans and U.S.-born Latinos in recent years were especially sharp, according to the study by the Pew Hispanic Center, a project of the Pew Research Center in Washington.

Overall, the homeownership rate nationwide dropped from 69% in 2004 to 67.8% last year, a loss of 1.2 percentage points. The rate for black households, though, fell 1.9 percentage points, to 47.5%, reversing increases over four years. The rate for U.S.-born Latinos peaked in 2005 but has since fallen 2.6 percentage points to 53.6%.

The declines among the two minority groups were surprisingly severe, said Robert Kleinhenz, deputy chief economist at the California Assn. of Realtors.

"I don't think it's a function of ethnicity, or at least not exclusively, but has a lot more to do with the socioeconomic situations these households find themselves in," he said.

For Californians, Kleinhenz suspects, the swings are magnified because of traditionally higher home prices and an ownership rate that usually lags behind the national rate by about 10 percentage points.

"We're seeing much more severe corrections taking place in a much shorter period of time," he said. "High home prices drove large segments of the California population to experiment with new types of financing, many of which turned out to be problematic. Households at the margin were trying to get their piece of California homes."

Kleinhenz believes that ownership rates nationwide will start picking up as early as next spring but after that won't reach peak levels any time soon.

During the boom time, roughly 1995 to 2005, minority groups reached for the American dream at a much faster pace than whites did. Homeownership among whites increased 5.6 percentage points to 76.1%, while increases among minority groups ranged from 11.7 percentage points (to 60.8%) for Asians to 6.8 percentage points (to 53.3%) for immigrants. The rate for Latinos rose 9 percentage points to 56.2%, and for African Americans, 7.5 percentage points to 49.4%.

The statistics showed that the gap in homeownership between whites and minorities had narrowed but still remained significant, according to the study's authors, Rakesh Kochhar, Ana Gonzalez-Barrera and Daniel Dockterman.

They also found that blacks and Latinos were more likely than whites to take out higher-priced subprime loans, designed for borrowers with low credit scores. Just 10.5% of loans to whites in 2007 fit that category, compared with 27.6% of loans taken out by Latinos and 33.5% by blacks.

One surprise from the study was that the drop in homeownership hit U.S.-born heads of households harder than immigrants, who were less likely to be homeowners anyway.

The Pew study analyzed data from private and government sources, including the Census Bureau and the Bureau of Labor Statistics.

tiffany.hsu@latimes.com

Short Sales Long on Surprises

Stressed homeowners with now-unaffordable mortgages are making deals with banks for "short sales," but may find themselves sued by their former mortgage holders even after they walk away from their homes, according to a report in The North County Times of Oceanside.

Homeowners are being surprised by clauses in their new legal documents which allow mortgage holders to sue to recover their financial losses against unwitting homeowners who were counting on a short sale to get them out of a mortgage mess, the newspaper reported.

The newspaper said real estate lawyers in northern San Diego County are increasingly finding language in short sale agreements from lenders that allow them to sue for any "deficiency" after the home is sold at a loss to both the mortgage holder and the homeowner. This language means the bank could go after the homeowner even after the bank has agreed to such a short sale, the lawyers said.

One real estate broker in Vista said lenders are reserving the right to sue homeowner years after the short sale disposes of the house. The banks "are saying, 'Down the line, if you have the money, we'll go after it,'" said Susan Anderson, manager of a Coldwell Banker office in the San Diego suburb.

Lawyer John Brady said the banks appear to be luring homeowners out of mortgages that are legally protected from collection suits, get them out of the house and into a legal arrangement that opens the door to suits. "They're being sneaky," Brady told the North County Times. "They're trying to keep the door open to be able to collected on any deficiency."

California law protects homeowners from being sued by their mortgage holders, who are limited to the legal tool of foreclosure to collect on a delinquent mortgage. This protection applies only to first mortgages, and it prevents a bank from filing a collection lawsuit unless it wants to foreclose on the property, which can be a costly procedure.

By agreeing to a short sale, the homeowner can avoid foreclosure and save his credit rating, attorneys told the newspaper. But the banks are inserting language into the deal to reserve a right to go after the homeowner years after the short sale.

The newspaper obtained a copy of a proposed short sale agreement between a homeowner in El Cajon and Countrywide Financial, which included a clause that reserved a right for the lender to "pursue a deficiency judgment for the difference in the payment received and the total balance due."

Lawyers told the newspaper that banks will withdraw that language when challenged. Hiring an attorney to represent a homeowner in the process costs between $1,000 and $1,500.

Home prices in parts of California have dropped as much as 40 percent, and as many as three out of every four homeowners in some hard-hit areas like Riverside or San Diego County find themselves paying mortgages that are worth more than their houses are worth. About 40 percent of the homes sold in San Diego County are apparent short sales, analysts told the newspaper.

The North County Times said it could not find any lawsuits filed by mortgage companies to recover losses after a short sale had been concluded. But real estate experts said they have heard about collection letters from mortgage lenders like Bank of America, Wells Fargo and JPMorgan Chase, the owners of the former Washington Mutual.

"Stay tuned, fasten your seat belt," said Escondido real estate lawyer David Bright. "We have to wait and see what these lenders do. They might not think it's worth it politically."

Copyright City News Service

Riverside County foreclosures increased by more than 12 percent in the first quarter, according to a report released this week

Riverside County foreclosures up 12 percent
DESERT SUN WIRE SERVICES

The number of Riverside County homes slipping toward foreclosure increased by 12.5 percent in the first quarter of the year, compared to the same period in 2008, a real estate information service reported.

While foreclosures eked up, lenders sent a record number of mortgage default notices to homeowners across the state yesterday.

Lenders sent default notices to 16,906 homeowners in Riverside County in the first quarter, up from the previous year's first-quarter total of 15,022, according to La Jolla-based MDA DataQuick.

Riverside County is near the top in the nation in foreclosures. Foreclosed properties represent about 41 percent of all market activity.

MDA DataQuick has reported that median home sales prices in Riverside County fell 40 percent in February, dropping from $325,000 the year before down to $190,000.

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6 Reasons Why It's Still a Good Time to Buy

Home Loan Rates Are Dropping

The housing market is looking healthier. Here are six reasons why now is the time to jump into the market.

1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)

2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.

3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.

4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.

5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.

6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.

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Source: The Wall Street Journal, June Fletcher (03/27/2009)

America for Sale: Outside Investors Snatch Up Housing

This Could Be Sign That Housing Market Has Hit the Bottom and Will Recover

By LISA FLETCHER, PETER IMBER and IMAEYEN IBANGA

States like Michigan, California, Nevada and Florida  all of which have struggled with tight housing markets  have seen an influx of foreign investors swooping in to snatch up real estate deals, local real estate professionals said.

Some call the foreign investors real estate vultures who are picking up the remains of a shattered housing market.

"[I've] had people come here from the U.K., certainly from Canada [and] received inquiries from Australia, Brazil, China," said Detroit real estate investor Ian Mason.

With some homes up for one-fifth of what they once cost, the nation's housing crisis has become a boon for outside investors. In February, prices plunged 16 percent from a year ago.

The tens of thousands of residences tied up in foreclosure, along with other distressed properties, have lured potential real estate buyers to the United States to take real estate tours, like a recent one in which Chinese businessmen toured upscale homes for sale in New York.

Some Chinese investors like to see a house to make sure it has the proper feng shui before making an offer, but other their foreign investors don't necessarily feel the need to leave home to buy a house.

"They don't necessarily feel a reason to come over here and look," said Pat Lashinsky CEO of Zip Realty in the San Francisco Bay area. "Some of them will actually buy just through what they're seeing on the Internet."

American investors haven't been left out of the mix. Many are purchasing homes in cities like Detroit and Cleveland to fix them up and get them back on the market.

Bruce Norris said he hopes to pick up 100 homes by year's end in California's Inland Empire east of Los Angeles.

He showed off a home he is currently renovating, which sold for $350,000 at the peak of market.

"We bought it for $55,000. We'll fix it with about $37,000, $38,000."

And in a few months, he'll list it for $165,000.

This may be a sign that the nation has hit the bottom of the real estate slide, some say.

"Without question, what's happening is a positive sign," said Stuart Gabriel, a professor and director of UCLA's Ziman School of Real Estate.

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