Real Estate Information

Everybody is discouraged by the drop in home prices over the last 3-4 years, especially people who want to “move-up” to a larger home. 

Our statistics show that the median selling prices of residential homes in our 24 town area (from Branford to Waterford) have dropped 14.1% since 2006 (as of November 2009). 

So should you “move-up” now or wait for prices to re-bound to 2006 prices (the same percentage as the decline 14.1%)? 

I’ve estimated the results of buying now or waiting as shown in the table below: 

We’re making several assumptions including:

1.  Current home and move-up home prices ($300,000 and $400,000)

2.  That the tax credit will only last until April of 2010.

3.  Prices will increase 14.1% in late 2010 or 2011 (at the same percent decline since 2006) 

Why is the gain so much larger by moving-up now?  Any increase in home prices will be a larger dollar amount using the median price percent change AND we’re assuming the government tax credit will be phased out at the end of April 2010. 

So now is really a good time to “move-up” to that home you’ve always wanted! 

In addition, you “save” a net $14,100 by purchasing a more expensive home compared to what it would have cost in 2006 PLUS the government tax credit.

Q: What has stayed the same:

(1) First time home buyers still get a credit of as much as 10% of the purchase price up to a maximum of $8,000.  "First time" means people who haven't owned a principal residence for three years before the purchase.

(2)  All taxpayers who claim a credit must use the home as a principal residence for the next three consecutive years.

(3)  The credits offer dollar-for -dollar reductions of tax and are refundable (if you owe $3,000 in taxes, you will get a $5,000 REFUND).

(4)  Buyers who buy a home in 2009 may claim the credit on either their 2008 or 2009 tax returns and those who buy in 2010 may claim their tax credit in 2009 or 2010.

(5) If you buy from a lineal ancestor or descendent, (parents/grandparents and children or grandchildren) you do not qualify. 

Q What has Changed:

(1) You must have a contract in place by May 1, 2010 and close by July 1, 2010.

(2)  The price of the house is now capped - no credit for any home over $800,000.

(3)  There is now a new tax credit for repeat buyers.  If you have lived in your home for 5 consecutive years of the last 8, you can qualify for a tax credit of 10% of the purchase price up to a maximum of $6,500.

(4)  Income limits are more generous:  for single people, the credits phase out between $125,000 and $145,000 and for married people, between $225,000 and $245,000 of modified or adjusted gross income.

(5) The new law contains "anti-abuse" measures - mainly - you will need to furnish proof of purchase (typically a HUD-1 form showing the details of the transaction). 

For more information, go to www.federalhousingtaxcredit.com            

SOURCE:  "The Lowdown on Home-Buyer Tax Credits" WSJ, 11/12/09

We are excited to learn that the proposed homebuyer tax credits have been extended for first time buyers and credits are now available for repeat home buyers.

Here is a summary of the new homebuyer tax credits:

Source:  www.federalhousingtaxcredit.com from the NAHB web site.

 $8,000 First-time Home Buyer Tax Credit at a Glance

• The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.
• The tax credit applies only to homes priced at $800,000 or less.
• The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify
• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
• For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

 The $6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance

• To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $6,500.
• The tax credit applies only to homes priced at $800,000 or less.
• The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
• Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

Mr/Mrs. Seller, concerned that you're not getting many showings?  Few phone calls from your agent with market updates?  Few sales being reported in your local paper?  Maybe it's because were in the "Summer Doldrums"?  

First, exactly what are the Summer Doldrums? 

Google's first 10 searches related to the stock market - that stock brokers are human and go on vacation, to the beach, etc. and are not around to talk their customers into buying and selling stocks, so it's the doldrums until Labor Day when everyone gets back to work. 

Bing's first 10 searches were much different:  # 10 was related to the stock market but 1-9 had a variety of results from bird watching to fishing to summer camps. 

So, lets first turn to the dictionary:Definition : "doldrums" 1.  A state of inactivity or stagnation, as in business or art:  August is a time of doldrums for many enterprises.  2. The doldrums, a belt of calms and light baffling winds north of the equator. 3.  A dull, listless, depressed mood; low spirits.

What?  No mention of Real Estate being in the Summer Doldrums?

Maybe everybody else is busy making deals happen, but not here along the Connecticut Shoreline - at least not as active as we would like. 

Sellers in particular are wondering what is happening?  Why no showings?  Why no offers?  Why are buyers not able to sell their home to buy my home?  Why are banks rejecting appraisals? 

Here's my answer to one of my frustrated sellers: 

Mr/Mrs. Seller, let's look at the key factors that determine how fast your home will sell: 

1. Real Estate Business Cycle

a.  We are currently in a "buyers" market; also, July and August are typically the slowest times of the year for home sales - so that's why things are slow. 

b. We're still in a difficult economy with few companies hiring, high unemployment and people who want to move but can't sell their homes.  I just received a call today from a local agent who has three buyers with homes to sell before they can buy - asking me for cooperation with a public open house to get activity. 

2. Location/neighborhood

We all know that location is important.  When there are many choices on the market (high inventory), buyers can pick properties that are closer to major highways for a shorter commute or properties with more acreage for privacy. In other words, properties that meet their needs with less compromise that in a more active "balanced" market. 

3. Condition

Buyers are usually looking for properties that are "ready to move in".  They have seen granite countertops - so that's what they want;  they've seen crown molding - so that's what they want;  they've seen a well staged home, so that's what they expect In short, you've got to put your best foot forward - get staging advise, remove clutter, "neutralize" rooms with bright colors; keep the house "clean as a whistle"  

4. Marketing

Have you reviewed the written marketing plan that I presented when we first met?    

I try to go beyond the "typical" things that all agents do;  for example: provide a floor plan (I use apex sketch - www.apexwin.com ); pay for a stager to give a consultation; use a feedback program to get results on showings (I use www.feedbackcentral.com)   We are doing very extensive marketing - this is key to selling your home.  Our 30+ item marketing plan with Internet exposure, web site, enhanced Realtor.com etc. 

5. Financing

This is another difficult area at the present time.  At one major brokerage company, they told me that about half of their contracts are falling apart because of financing problems - in one situation, the appraisal was done by the buyer but the bank doing the financing did not accept the appraisal - and often the appraisals are coming in below the selling prices due to lack of sales to do an accurate comparative analysis.  

6. Price

Again, buyers are all looking for a deal.  With prices about 10 to 15% lower than a year ago in many areas, use facts available from many sources (your local MLS board as a starter), and recent comparable sales to keep your sellers current with the market and adjust their selling price as appropriate.  Better yet, price it BELOW competition at the beginning and you'll get it sold to the next wave of buyers looking in that price range (easier said than done - but critical to get an offer in the early period after the initial listing date).

So, Mr. & Mrs. Seller, just be patient, September is just around the corner!

Have you ever had a carpeted floor that squeaks?  And have you ever had your listing agent walk on the squaky floor and say, "you need to fix these squeaks?"

I've got a solution that has a very good chance of eliminating all the under-carpet squeaks and you, the home-owner can "do it yourself".

 I don't often promote products on my blog but this one works so well (from personal experience) that I thought I'd pass along the tip.

The product is called "Squeeeek No More®" from O'Berry Enterprises, Inc., Ringwood, IL.  It's a kit that can be ordered on line or from your favorite hardward store - the Ace Hardward store near me knew about the product but had to order it - it came in three days and I saved on the shipping costs.

I've found it works best on carpeted floors that have a plywood base.  When my wife and I built our house 9 years ago, there were no squeeks but over the years, several appeared in the high traffic areas of our master bedroom.   

I first read about the device in "This Old House" magazine and after reading the review, went ahead and ordered the kit. 

For a video demonstration of how the system works, go here:

                                  www.floorscrews.com

As you can see from the photo, the kit consists of (1) a triangular jig that makes it easy to stop drilling the screw into the carpet a just the right depth to secure the sub-floor to the floor joist yet not protrude above the plywood and leave a sharp screw end (2) A special drill bit for the screw and jig (3) 50 special scored screws approx. 3" long that allow you to break off the screw after drilling into the carpet and plywood and floor joist.

There's even a special joist finding screw that you can use to accurately find a floor joist to drill into - and that's key because you need to fasten the plywood into the joist.

I found that I needed about 30 screws (out of 50 supplied) to completely eliminate all the squeaks.  Since the floor joists are supposed to be 16" on center, all you  need to do is carefully measured from a known floor joist to the next, and place screws about 4" apart until the squeak disappears and just like majic, you've eliminated an annoying noise that could kill a deal or at the least, make you and your buyer uncomfortable - you don't need a buyer focusing on a squeak when it can be fixed for less than $25.00.

You can buy it at your local hardware store or from Amazon here: 

                                     http://tinyurl.com/n6cw7z

        Concerned about loosing money if you decide to sell your home and move up to a larger home or into a different, more expensive neighborhood?  You’re not alone. But if you think about it, you’ll be buying for less and since the more expensive home has most likely dropped an equal percentage, your net dollar savings is considerable. Here’s a good article that describes a real-life story from an article on the MSNBC web site:

        ***************************************************

Math Smiles on Move-up Buyers

By Mike Stuckey

Senior news editor

msnbc.com

updated 7:52 a.m. ET, Thurs., April 23, 2009

BOTHELL, Wash. - After two years of married life in a 680-square-foot, one-bedroom Seattle condo, Lori and Chris Kirsten were ready to spread out in a real house with room for a home theater and a yard where the Labrador retriever they had always wanted could roam.

The Kirstens prepared to list their condo for sale and go house-hunting, banking on equity in the unit, which Lori had brought in 2003 for $130,000, to help with the transition to a larger place. Seattle’s hot real estate market had pushed the condo’s value to $215,000 or more at its peak in 2007.

But their home search lost some steam when their agent told them Western Washington real estate prices, although not in the freefall experienced elsewhere, had still declined to the point that their unit might now fetch $25,000 or $30,000 less than two years ago. When they saw condos comparable to theirs selling for as little as $170,000, “I thought, ‘I just can’t do it,’” Lori recalled.

Their mood brightened when they began shopping in the spacious neighborhoods of this suburb northeast of Seattle and found a 3,000-square-foot, four-bedroom split-level on a half-acre of towering fir trees that they wound up buying for $425,000. That’s $86,000 less than the $511,000 peak value placed on the home by real estate Web site Zillow.com, $64,000 below the original asking price of $489,000 and even well below the final asking price of $438,000.

A buyer’s market

The Kirstens — Lori, 36, is a physical therapist and Chris, 33, is a Microsoft manager — are among the relatively small number of home buyers across the nation who are taking advantage of the record drop in real estate prices and historically low interest rates sparked by the mortgage meltdown and foreclosure crisis to move up into bigger or fancier digs.

It’s a trend that many in the languid real estate industry would like to encourage.

“Obviously, if you’re selling for less than you could have gotten two years ago, you’re disappointed, but you really need to look at your bottom line,” said Walt Molony of the National Association of Realtors. “If you’re trying to trade up, whatever you’re going to trade up to is going to sell at a discount, too. You need to look at your net.”

Real estate agents from the foreclosure epicenters of Florida and California to more stable markets like the Seattle area are using that advice to lure move-up buyers.

“Do the math,” said agent Mark Zawideh, who has been selling homes in the suburbs west of Detroit, where prices have declined 18 percent in the last year alone. “If you’re in a $200,000 house (the median price in the area) and you lost 18 percent, that means you lost $36,000,” Zawideh said. “But if you’re moving up and buying a $500,000 house, that person just took a $90,000 loss, so you can see you’re making 54,000.”

“If you didn’t sell at the peak, be happy,” Zawideh said. “Don’t look back and be sorry. The fact that you’ve waited ends up being a great decision. A lot of people get excited when they sit down and do the math.”

Local Market Statistics Through April 2009 (22 Shoreline Towns)

Housing supply, as measured by the absorption rate (months to sell existing inventory), is 42% higher than a year ago (still very much a "buyer's" market!)

Since a "balanced" market has about 6-7 months of inventory, a change in supply (more sales or fewer homes coming on the market) is needed.  Even though the number of homes for sale is the same through April, sales declined 22.5% - a lot of buyers are still waiting for lower prices!

The following data is from our local MLS Board statistics, selecting data from 22 towns from Branford to East Lyme (2008 vs. 2009):

Looking further into the data, the higher price levels had twice the decline in sales comparing 2008 to 2009. 

There were 504 sales in the $0-$599,000 price range in 2008 compared to 399 sales in 2008 (a decrease of 20%).

At the $600,000 to $1,000,000 plus price range, there were only 45 sales in 2009 compared to 75 sales in 2008 (a decrease of 40%)

The Wall Street Journal reported that existing home sales increased at a 5.1 % (seasonally adjusted) rate (Feb 08 vs Feb 09).  But a large part of this gain (nearly 50%) is due to "distressed" properties - those priced 20% below normal market prices.  

What about the Connecticut Shoreline?  Since the major buyer activity nationally is in So. California, Las Vegas, Arizona and Florida, our local area is not as rosy.  Our existing home sales were much lower in February, but recently, activity has picked up.  More buyers (who have been holding back, waiting for some better news) are calling and asking for showings. 

It's also interesting that some buyers are thinking longer term:  buy a good building lot now while prices are still low, and build later when they can sell their home for a better price.  Not a bad strategy! 

But what if you are thinking shorter term; upsize?  Downsize?  Buy now or wait?  Here are five reasons to list your house now: 

1.  Interest Rates: still very low, near 5% or lower on 30 year fixed mortgages. 

2.  Sell Low, Buy Low: If you have to accept a lower price on your home now, you'll be buying at a lower price so you'll make up the lower price on your next purchase. 

3.  Buyers that are in a rental or condo are moving up and they are finding a good selection of homes.  Sellers - you need to have your home on the market to capture these people. 

4.  There are more distressed properties (foreclosures, short sales) in the market which brings buyers out to look - many get discouraged when they find these properties are priced low for a reason - often, they require significant funds to make them livable.  A large portion of buyers then start looking at better properties: yours!! 

5.  People are always moving -- in up and down markets, someone's  relocating, upsizing, downsizing, getting married, and they're going out to open houses on Sunday's and you need to be ready for them! 

So it makes perfect sense to move on with your life - if you've been thinking about selling, call us; we'd be happy to do a market analysis on your home at no cost or obligation.  Give us a call!

I've been reading a few articles on the Federal Government's "Making Home Affordable" plans and it's confusing, to say the least.

1.  SUMMARY OF BOTH PROGRAMS:

I did find a good article in the form of "Questions and Answers" that seems clear and offers a description of each of the two programs:  The Refinance Program and the Mortgage Modification Program (a 10 page *.pdf file).  WARNING: this is a detailed description of the programs; plan to spend several minutes reading this article - for eligibility please refer to questions 6 (refinance) and 12 (loan modification). 

Here is the site: http://www.financialstability.gov/docs/counselor_qa.pdf

2.  Link to REFINANCE ELIGIBILITY PROGRAM

There's also an "easy" flow sheet that you can read, answer Yes or No, and find out if you qualify.  For the home mortgage refinance program, please go to: http://www.financialstability.gov/makinghomeaffordable/refinance_eligibility.html

3.  Link to the MORTGAGE MODIFICATION PROGRAM

Here's the second section on mortgage modification - again, you can answer the questions and find out quite easily if you qualify.  Please go to: http://www.financialstability.gov/makinghomeaffordable/modification_eligibility.html

Please let me know if these articles have been helpful to you.  If you have any further questions, please let me know - I'll gladly refer you to a mortgage professional who can provide more details regarding both programs.

As part of President Obama's budget proposal for 2010, the mortgage interest deduction for high income taxpayers will be reduced. 

The proposal (according to the Wall Street Journal today, 2/27/09) is to reduced the amount that can be deducted for those in the 33% (joint filers with $200,300 to $357,000 in taxible income) and 35% tax brackets (joint filers with over $357,000 in taxible income).  Those in these higher brackets will only be able to deduct interest at the 28% rate. 

Thus for each $1000 of interest, there is a $350 deduction (at the 35% bracket) and with the budget proposal, it would be reduced to $280.00 

The good news is that the majority of taxpayers won't be effected by the proposal - lets just hope that this idea doesn't spread to include other tax brackets!!