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Billionaire investor Warren Buffett predicted that the real estate market downturn will end by 2011 as the housing inventory declines. "Within a year or so, residential housing problems should largely be behind us," Buffett wrote in his annual letter to the shareholders of Berkshire Hathaway, where he is chairman and CEO. "Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means." He also pinpointed what he sees as the cause of the downturn. "People thought it was good news a few years back when housing starts, the supply side of the picture, were running about 2 million annually," wrote Buffett, "But household formations, the demand side, only amounted to about 1.2 million." Source: Bloomberg News

First-time home buyer and move-up tax credits worth $8,000 and $6,500, respectively, expire April 30. Buyers who qualify get a dollar-for-dollar reduction in taxes or a cash payment if they don’t pay enough taxes to cover the credit. Other factors that should spur buyers include low rates. If the Federal Reserve stops buying securities backed by home loans at the end of March, 30-year rates will almost certainly rise to more than 6 percent. Finally, about 30 percent of markets are already experiencing price increases. Prices are falling in 12 percent of markets, says Fiserv, but that only helps if you want to live there. Source: Money Magazine

The Mortgage Bankers Association is seeing signs that the foreclosure crisis is ending. “The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” says Jay Brinkmann, MBA’s chief economist, in a published statement. Brinkmann said that normally there is a large spike in short-term delinquencies at the end of the year because of high heating bills and holiday expenditures. This year, there was not only no spike, but the 30-day delinquency rate actually fell from 3.79 percent to 3.63 percent. Thirty-day delinquencies have historically been a leading indicator of serious delinquencies and foreclosures, Brinkmann said. “[This] gives us growing confidence that the size of the problem now is about as bad as it will get,” he said. Source: Mortgage Bankers Association of America

The Internal Revenue Service has clarified which documentation taxpayers need to submit to claim the first-time and move-up homebuyer tax credit. While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common. The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.” For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or interest statements. Source: Washington Post

Despite a slow market and a slight decrease in the resale value of most remodeling projects, Realtors® report that the smartest home improvement investments may also be some of the least expensive. Results from the 2009 Remodeling Cost vs. Value Report show that small-scale exterior projects are the most profitable at resale, according to estimates by Realtors® who completed a recent survey. On a national level, eight out of the top 10 projects in terms of costs recouped were exterior replacement projects that cost less than $14,000. Certain types of door and siding replacements, as well as wood deck additions all returned more than 80 percent of project costs upon resale. A steel entry door replacement, a new addition to this year’s list, recouped 128.9 percent of costs, followed by upscale fiber-cement sliding replacements at 83.6 percent. Wood deck additions recouped 80.6 percent of costs. “Once again, this year’s Remodeling Cost vs. Value Report highlights the importance of a home’s first impression,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. Source: National Association of Realtors.

If you have questions or comments: Chuck.Mortgage@Gmail.com  

Some seasonal home search hints:

Home Shopping-Don't wait til spring. True, there's a greater choice of homes in the spring, but sellers then can better stick to their asking prices because of demand. Most people don't do that. They just get carried along with the crowd. Additionally, when home loans are less in demand, some lenders can give a break on costs.

Hint- Slow season can be a great season to get a deal.

Off-season dealing: Sellers in winter, are often more motivated to deal, some real estate agents say. "I've had my best months in the winter and early spring".

Hint- There is less competition in the winter, so you might get a better chance at the home you want.

        And don't forget to bring an umbrella....

: )

If you have any questions or comments: Chuck.Mortgage@Gmail.com

Nearly 5 million houses and condos, of which the loans are delinquent, will go through foreclosure over the next few years, a new study by John Burns Real Estate Consulting Inc. concludes. This represents more than half of the 7.7 million households now behind on their payments. The situation is worst in Arizona, California, Florida, and Nevada. Burns calculates that there is an inventory equivalent to 27 months of sales in Orlando, 24 months in Miami, and 18 months in Las Vegas. Consulting firm CEO John Burns says there is strong investor demand for these properties, so as long as employment continues to recover and rates remain moderate, these sales won’t have much impact on overall prices. Source: The Wall Street Journal

Nothing new here if you are following the market. We have seen this trend coming for quite some time. Truth is investors and first time buyers are grabbing up the properties faster than the banks can release them.

We experience multiple offers on almost every foreclosure we see. Hopefully buyers who are "on the fence" waiting for the bottom will realize they may have already missed it and get in before rates and prices go back up..

Fixing the economy can all be described with one word: Confidence. We need the consumer to be confident enough to make long-term decisions such as purchasing a house for their long-term security. We need businesses to be confident enough to hire workers so that they can expand in the long-run. We need investors confident enough to purchase financial instruments so that banks are confident enough to lend to businesses and consumers. Certainly, the past few years have not been a period of confidence. On the other hand, sometimes events outside our own control give us another perspective. The tragedy beset upon Haiti is of a magnitude that is hard to conceive. Yet, the response of the world to the aid of this small country also is of a magnitude that is hard to conceive.

While we expect major economic powers such as our country to step forward, the realization of this world effort comes from stories of countries such as Norway. Norway, with a population about half the size of New York City, is contributing over $17 million to the cause. The plight of Haiti puts our crisis in perspective. This country knew of their vulnerability to an earthquake, but did not have the financial resources to rebuild. Our problems are many and many have suffered. But we are a great and resilient country and we must have the confidence that we can overcome our issues. Perhaps as we rally around Haiti, it will move us to rally our country out of our own crisis of confidence. We can do so much more for the world if our own economy is stronger. One indication would be a positive preliminary report of economic growth for the fourth quarter. This indicator is just around the corner.

It was interesting to see the media jumping all over the increase in home sales over the last 7 months.

Of course it did, sales always increase in spring and summer. It has been this was for years in good and bad markets.

Now overall our sales are up dramatically here in California which is good. Sales have slowed in the winter months but we are up overall. Finally...

Usually thru the new year people slow down with families and traveling. Things traditionally pick up again starting in Feburary and accelerate from there until about October.

We should get a great boost in sales with the extension of the Fed's tax incentive extension until April 2010.

Prices even had a bit of an upswing in 2009, so it will be interesting to see how it pans out in 2010. I hope the worst is behind us, but if its not, buying or locking in a low rate now still makes the most sense.

Once rates finally do go up, the cost of owning a home will be far higher than a tiny drop in price.

So if you are looking to buy or refi, let us know if we can answer any questions for you.

In December 2009 rates move upward. We have been expecting this for some time now with the volatility in the bond market. Now even if rates move back down at the beginning of this year, there is something to be learned.

--Rates have been at historic lows from 2008 all through 2009.

Due to the Federal Reserve Board lowering short term rates and providing massive amounts of liquidity to the system in the face of the credit crisis. Remember the Fed controls short-term rates. Long-term rates such as rates on home loans are subject to the whims of the markets. As long as the economic news was bad, and it was for most of 2009, the markets stayed in line. Now as the news starts getting better, there is less of a need for the markets to stay in line, and a great chance of rate increases.

Remember, when rates are at historic lows, there is nowhere to go but up.

We are not saying the move we saw in the past few weeks represented a permanent turn in the market. (hopefully not) But eventually that turn will happen. Anyone who is planning a major purchase, from a car to a home, should take note of this fact and act accordingly. Rates are still great, but we don’t know for how long they will stay that way.

2010 is upon us. Are you ready?

The new year brings a few changes in the mortgage market.

The biggest change is the updated disclosure on the Good Faith Estimate.

It is a new multi page form that is designed to allow mortgage clients to easily see the costs and fees associated with the loan.

Certain bank fees and title escrow costs are not allowed to change by more than 10% +/-....

This is an effort to keep transparency of costs to the clients.

It also is supposed to keep shady mortgage brokers honest.

A more important rule to keep mortgage brokers honest is the new rule that they must be licensed, and register with the Nationwide Mortgage Licensing System Registry (NMLS+R).

This is a new agency that can monitor mortgage originators to be sure they are not performing any illegal activity, and to discipline them if needed.

FINALLY. This has been needed for the last 10 years and is part of the reason the industry has been so damaged.

Too many mortgage originators had too much freedom and greed.

I think this is all a step in the right direction.

In my 15 years of business, it is great to see some regulation in the mortgage industry.

Hopefully this, along with the tough market will continue to "weed" out the bad guys....

For 2009 the real estate market in California was up overall compared to 2008.

The market is very busy in the under 400,000 price range with many 1st time buyers and investors entering the market. The tax credit really helped too.

The over 400k range has been a bit slower but the drops in value in our area of Tustin Ranch, CA 92782 have not been to bad.

Most of the homes, townhomes, and condos appear to be selling quickly.

The prices are down, but not as bad as some other areas in Orange County.

Also the Government decided to extend the 1st time buyer credit until April, so move fast if you are buying.

They also added a "move up" credit for buyers wanting to upgrade to another home.

All good news.

2010 predictions I have seen:

-Continued improvement in the number of sales and possible gains in value.

-Rates to increase due to inflation pressures.

-Possible 2nd wave of foreclosures coming in the high end market to to Neg Am loan resets.

Who knows what the results will be.

All I know is there is a lot of activity out there.

Let me know what your thoughts are?

Also one of my resolutions for 2010 is to get my blog going.

Let me know what I can do to improve?

Thanks,

Chuck Davis

Mortgage pro in Tustin Ranch, all Orange County, and all Southern California.