Sue Fox, @Properties. Direct 773.816.1788
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Archive for the 'First-time buyers' Category
If you are planning to sell your home in 2010, the best time to start will probably be the moment you ring in the New Year! That only gives you three weeks to prepare, I know, but there are at least five great reasons to get your condo or house all spruced up and ready to hit the market in January.
1) The Home Buyers Tax Credit: Now it’s not just the first-time buyers who can benefit from the government’s free cash. Homeowners who are trading up (or down) to another home are also eligible for thousands of dollars. With first-timers standing to make $8,000 and move-up buyers in line for $6,500 apiece, that’s an awful lot of buyers who must sign a purchase contract by April 30, 2010, in order to qualify for the tax credit. That means that January, February and March will be bustling as buyers brave the snow to hunt for their future home. As a seller, you need to put your best foot forward with a polished, well-priced home that will capture their attention.
2) Incredibly Low Interest Rates: Borrowing is very cheap right now, with mortgage interest rates hovering at record lows. According to interest.com, the average rate for a 30-year, fixed-rate mortgage — the most popular way to finance a home — was just 5.01% in the latest weekly survey of major lenders. It’s a great time to lock in an interest rate, and savvy buyers will be taking advantage of this easy money while they can.
3) Home Prices Are Bottoming Out: For the last five months, home prices in Chicago have stopped sinking and actually started climbing. They’ve only gone up a percentage point or so each month, but the overall trend is unmistakable: Prices are rising. We seem to have hit bottom. For the long-term buyer, who plans to hold onto his/her property for years to come, this is a giant green light.
4) Home Sales Are Skyrocketing: The proof of the pudding is in the tasting, and thousands of buyers are already gobbling up Chicago real estate. Buyers surged into the market this fall — sales were up 28.5% throughout the city of Chicago in October — and now others who were sitting on the sidelines feel reassured. Rising sales help put a floor under prices, allowing the market to stabilize and attracting more buyers who realize that this potent mix of low prices, low interest rates and a fat government tax credit will not last long.
5) Unemployment Is Falling: Real estate is sensitive to changes in the job market, and this month we’ve seen some signs that better days are ahead. Nationally, the unemployment rate fell in November from 10.2% to 10%. The drop surprised analysts, leading many to surmise that the downturn had ended. The economy certainly seems to be back on the rails after a very tough year, and housing will only benefit as the job picture brightens.
SO IF YOU ARE THINKING ABOUT SELLING YOUR HOME NEXT YEAR, please call me now! It’s time to clear out the clutter, make any necessary repairs, analyze your neighborhood’s prices and sign the paperwork, so that your home is absolutely ready to hit the market in January.
For all you first-time buyers out there who closed on a home this year, that $8,000 the government promised you is on its way…almost. The Internal Revenue Service just released guidelines for claiming the tax credit, and its advice is to wait for a couple weeks.
That’s because the government is about to publish a revised Form 5405 with all the instructions for claiming your money. It will include all the changes made Nov. 6 when President Barack Obama signed into law an expanded program, which now provides a $6,500 credit to “move-up” buyers, people who sell their home and buy another one.
Other changes include expanding the income limits to $125,000/year for single people and $225,000/year for married couples. (Unfortunately, if you closed before Nov. 6, the old income limits still apply. So if you made more than $75,000 as a single person or $150,000 as a couple, you’re out of luck.)
Anyone who buys their home after Nov. 6 must use the new form to claim the credit, according to the IRS. So if you have recently closed on your purchase, try to be patient for a few weeks before filing your claim.
The Federal Housing Administration has been putting buyers into homes this year like never before. With the rest of the mortgage market in disarray, FHA has stepped boldly into the gap, insuring mortgages so that banks could keep lending even as default rates continued to climb.
In 2006, when most lenders were happy to hand out money to just about any borrower, FHA mortgages accounted for only about 3% of the U.S. market. Today nearly a third of all purchase loans are insured by the FHA — making the federal government a huge player in the mortgage market, and putting the FHA at huge risk if these loans start to falter.
And falter they have. The delinquency rate for FHA loans is now more than 15%, according to the Mortgage Bankers Association. Which means that the FHA must tighten the purse-strings, making it harder than ever for borrowers to qualify for a loan.
This year, at least half my clients used FHA to seal the deal, either as buyers taking advantage of the low 3.5% down payment these loans require, or as sellers who found an FHA buyer for their home. FHA was the grease that kept the battered, broken-down jalopy known as the housing market running in 2009.
But things are about to change. Among the measures the FHA is considering: Hiking the minimum down payment to 5%. Raising the required credit score to 640 or higher. Increasing the mortgage insurance premiums borrowers must pay.
All of these changes would squeeze out borrowers who have middling credit profiles or who don’t have much cash to put down. They will certainly limit risk for the government… But they will also make it tougher than ever for people to buy a home.
Buyers know a good deal when they see one. In October, they barreled into the housing market, driving up sales in Chicago by 28.5% over last year, according to a report today from the Illinois Association of Realtors.
It seems that the government’s $8,000 tax credit for first-time buyers — along with relatively low interest rates — is working. In the city of Chicago, there were 2,012 sales of single-family houses and condos in October, compared to just 1,566 homes sold in October 2008. This is good news for sellers, because it means our bloated inventory of homes is actually beginning to shrink as buyers snap up deals.
“October’s extraordinary sales totals reflect home purchases by many buyers who were sitting on the sidelines of the housing market, waiting out the economic downturn, as well as more home sellers coming to terms with accurate pricing given the market conditions,” said Mike Onorato, president of the Illinois Association of Realtors.
But even though more properties are changing hands, prices have not recovered. The median home price in Chicago fell 18% since last October, from $262,250 to $215,000.
For sellers, it is critically important to acknowledge the shifting terrain and price your home accordingly. There is no room in this market for an overpriced property you’re trying to sell for what your neighbor got last summer. Don’t even bother. Buyers are smart, and as today’s report shows, they are out there in droves, willing to buy when they find a good deal.
The federal home buyer’s credit has now been extended (and expanded to other buyers) for the next five months. Don’t waste this chance to sell by sticking last year’s price tag on your home!
It’s official: The $8,000 tax credit for first-time home buyers has been extended for five more months. This is great news for anyone hoping to buy or sell a home soon, particularly in sluggish markets like Chicago!
On Friday, President Barack Obama signed a $24-billion stimulus bill that — among other things — extends the tax credit for first-time buyers until April 30, 2010. Buyers must sign a contract on a home by then, and close the deal by the end of June, to qualify. The new measure also provides a $6,500 credit for those who have lived in their current home for at least five years and are selling it to buy another home.
The income limits for the new program are also significantly higher, which will allow more people to take advantage of the government money. To qualify, a single person can earn up to $125,000 annually (or $225,000 for a couple). The law also extends unemployment benefits and provides and tax credits for some businesses.
The Senate approved the measure Wednesday and the House followed suit the next day. Compared to the contentious health care debate, this bill sailed through: The Senate vote was unanimous while the House voted 403 to 12 in favor.
There have been a lot of rumors and news reports flying around in the last couple days, suggesting that the government — yippee! — has decided to extend the $8,000 tax credit for first-time home buyers. However, it seems some people have forgotten the little jingle that explains how a bill becomes a law (“I’m just a bill… sitting here on Capitol Hill” see the video here, for old time’s sake.)
So far, only a group of Senate negotiators has agreed to extend, and slightly expand, the $8,000 tax credit. The program would give buyers until April 30, 2010 to sign a contract to purchase a home, and another 60 days to close. It would also allow other buyers who have lived in their home for at least 5 years to qualify for a $6,500 tax credit if they sell it and buy another home. Income limits for the program would increase, and the credit would only apply to homes that cost less than $800,000.
But remember, the bill still needs to be approved by the full Senate and the House. President Barack Obama has already indicated his support for the extension, which many housing analysts believe has helped stabilize the market. Some 400,000 home sales this year were spurred by the current credit, economists say, which is set to expire on Nov. 30.
“It is imperative that we retain the momentum we have gained as a result of the current credit,” said Sen. Johnny Isakson (R-Ga.), a former realtor who co-sponsored the measure, “and go into the spring market with the increased consumer confidence necessary for establishing a viable market.” Go, Johnny, go!
If approved, the tax credit extension would be seamless, with buyers noticing no disruption as November passes into December. For now, we are definitely getting closer, but it’s not a done deal yet!
Is our local housing market finally on the mend? Prices rose in Chicago for the fourth month in a row, suggesting that we’ve hit a bottom and are starting to bounce back.
According to the Standard & Poor’s/Case-Shiller home price index, Chicago prices inched up 1.7% in August compared to July. This doesn’t mean we’ve completely recovered; home prices citywide are still down 12.7% over the previous year… But that’s better than the 18-20% decreases we were seeing earlier this year!
Nationally, home prices appear to be rising as well. The Case-Shiller report, which covers 20 large cities, showed a 1.2% price jump between July and August. Prices are up in 17 cities since June. Chicago’s performance was among the best, after Minneapolis, San Francisco and Detroit.
But local economists warn that the rebound could be snuffed out by a wave of foreclosures expected next year, coupled with rising unemployment in Chicago. Unemployment in the metro area is now 10.1%, a sharp increase from 6.2% last September, according to the Illinois Department of Employment Security. That’s the worst we’ve seen it in 26 years.
Still, some housing analysts are optimistic. “Housing is as affordable as it’s been in 20 years,” Karl Case, the economics professor at Wellesley College who helped create the Case-Shiller index, told the New York Times. “I don’t see a very rapid recovery, but I think we’ve seen the bottom.”
Could it be? It looks like efforts to extend the $8,000 credit for first-time homebuyers are now moving to the top echelons of the government.
This week, President Barack Obama met with House Speaker Nancy Pelosi and Senator Harry Reid, the Senate majority leader, to discuss ways to improve our hobbled economy and create more jobs. Extending the housing credit — possibly until May — is one of the options on the table. Reid (who is up for re-election in Nevada, a state walloped by the housing downturn) especially favors the measure, according to the New York Times.
Economists estimate that the $8,000 credit spurred almost 400,000 sales this year nationwide, out of 1.4 million total sales. Some say that if the credit expires as scheduled on Nov. 30, house prices could begin to fall again, potentially pushing the fragile economy back into a recession.
FHA mortgages have exploded in popularity this year. With low down payments (typically just 3.5%) and competitive interest rates, these government-backed loans now account for a quarter of home purchases. But if you thought using FHA to buy a condo was complicated before (see my July 24 post), just wait!
Starting Dec. 7, the Federal Housing Administration will enforce new rules that could make the red tape ensnaring condo loans even stickier. In an effort to limit its risk, the FHA will no longer approve mortgages in condo buildings where 30% or more of the units were already financed by the FHA. For new developments, the developer must get the entire project approved before the FHA will authorize loans there, and half of the units must be sold off first before FHA will open its pocketbook.
Even in existing developments, sellers will now have to get the whole building approved by the FHA before a buyer can use this type of loan. I predict lots of sticky situations with condo boards, as anxious sellers try to persuade their neighbors that it’s worth the time, effort and money to get their building approved.
What does all this mean? Basically, it’s about to get a lot harder to buy (or sell) a condo. Chicago’s condo market is already bleeding, with sales down 19% in the last year, and the new rules will further constrict the flow of money available to finance such sales.
It will become increasing difficult to buy condos in new developments. And the government’s revised rules are bound to ripple across the non-FHA market as well, because all condo buyers ought to care whether or not people can use FHA loans in their building. If they can’t, after all, it will make it that much harder to resell the unit down the road.
The data on August home sales is out, and the picture isn’t pretty for condo sellers. The gap between single-family homes and condos widened dramatically, with sales of houses up 22.6% and sales of condos down 19.1% over last year, according to the Chicago Association of Realtors.
As prices have fallen citywide, it’s become more affordable for buyers — many of whom would prefer a house anyway — to reach for a single-family house instead of a condo. In fact, Chicago is so clock-full of rundown bungalows, ranches, and other houses whose owners are in trouble that the median price of a single-family house is now just $154,000, a 30% drop from last August. Many of these homes wind up in foreclosure, or sell for less than what is owed (a short sale), which further drags down prices.
Meanwhile, condo prices have also taken a hit, but a lighter one. They’re down 15.3% this year, with a median sales price of $271,000. “Condo sales, until the beginning of this year, were the best part of our market,” David Hanna, president of the Chicago Association of Realtors, told the Chicago Tribune. “There aren’t any buyers for this stuff because the lending process is tortuous.”
That’s true: Most lenders now require at least 10% down on a condo, unless you’re using a government-backed FHA or VA loan. But those loans come with a thicket of red tape. Meanwhile, in a big city like Chicago, the $8,000 first-time homebuyers tax credit has less impact, because so many people here earn more than the income limit. I have a buyer who just inked a deal for an Andersonville condo, but he makes more than $75,000 (the point at which the credit, for single people, starts to phase out.) He’s not eligible for any of the credit.
All of this means that condo sellers must be very realistic about pricing their homes. There are not enough buyers to absorb all the granite countertops, stainless steel under-mount sinks, and stackable washer/dryers now clogging the market in Chicago.
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