Denver Real Estate Blog

Do you still have questions about the Tax Credit for First Time Homebuyers?

You’re in luck…thanks to John Skrabec, owner/broker of LIVE Urban for putting this together…

Want to know more about how you can benefit from the Stimulus Package?  Let me know!

The Denver Metro is HOT right now, and I’m not just talking about the 70 degrees and lovely sunshine we had today…check out what the Business Journal had to say about the lastest Standard and Poor’s report…

Prices of existing homes declined less through 2008 in the Denver area than in any of 20 major U.S. cities, Standard & Poor’s reported Tuesday.

The monthly S&P/Case-Shiller Home Price Indices said average prices of existing homes in Denver fell 4 percent between December 2007 and December 2008, less than any of the other 19 cities in the report.

The average decline among the 20 cities was 18.5 percent, S&P said.

Among the 20 cities covered in the Home Price Indices report, Dallas had the second smallest year-to-year housing-price decline after Denver, at 4.3 percent, followed by Cleveland at 6.1 percent and Boston at 7 percent.

The cities with the greatest price declines were Phoenix at 34 percent, Las Vegas at 33 percent and San Francisco at 31.2 percent, S&P said.

The survey also indicated that Denver had the second-smallest decline in existing-house prices between November and December 2008, at 1.5 percent, behind only Boston at 1.3 percent. Denver’s decline between October and November 2008 was 1.1 percent.

Phoenix had the greatest month-to-month decline from November to December, 5.1 percent, followed by Las Vegas at 4.8 percent and Minneapolis at 4.6 percent, S&P said.

Nationwide, the S&P report painted a gloomy picture of steadily declining home prices.

“The broad downturn in the residential real estate market continues,” David Blitzer, chairman of S&P’s index committee, said in a statement Tuesday. “There are very few, if any, pockets of turnaround that one can see in the data. Most of the nation appears to remain on a downward path.”

The survey tracks changes in the value of the residential real estate market by comparing sale prices of specific sample homes in a city at two different times. Calculations are by Fiserv, Inc. using methodology developed by Karl Case and Robert Shiller.

The survey assigns an index number to each city and does not report actual home prices. The index is a measure of how much home prices have gone up or down in each market since January 2000, which has been assigned a price index of 100 in that market.

The report said Denver had a home-price index of 125.74 in December, meaning home prices have gone up 25.74 percent since January 2000. Home prices in Denver peaked in August 2006.

Six of the 20 cities had a lower price index than Denver, with Detroit at the bottom at 80.93. New York topped the list at 183.50.

The average price index for all 20 cities of 150.66.

Wow, with the New Housing Plan has come a ton of new business - both buyers and sellers are getting in on the action, and we are seeing the Denver market pick up at an unbelievable pace.  Case in point, the listing we put on the market last week already has a contract pending, and it had multiple offers for the list price.  So, if you have been sitting on the fence and waiting for the perfect time to buy or sell, jump down and join the fun - that time is NOW.

Of course, with the changes put in place by the Stimulus Plan, there are a ton of questions that our clients are asking…here are just a few:

- Should I refinance now, and will the New Housing Plan help me out even if I have never missed a mortgage payment?

The answer is maybe.  I like this summary from the New York Times:

Removing a limit on refinancing for “responsible homeowners”

4 million to 5 million households.

The bill will remove the current restriction on Fannie Mae and Freddie Mac that prohibits them from guaranteeing refinancing on mortgages valued at more than 80% of the home’s value. This will allow many more homeowners to refinance at lower rates.

Helping renegotiate loan terms for “at-risk homeowners”

3 million to 4 million households.

The bill creates incentives for lenders to modify the terms of subprime and other loans. Participating lenders will reduce payments to no more than 38% of borrower’s income, with the government matching further reductions down to 31%.

Who doesn’t qualify

There is also a good Question and Answer sheet posted on the US Treasury website: http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pdf

- Are there areas in the Denver Metro that haven’t decreased in value over the past year?

Absolutely.  There are neighborhoods that have increased in value over the past year - and that are projected to keep on doing so.  Highlands, Berkeley, Sunnyside, Wash Park, Congress Park and Cheesman are just a few of the places where it’s still rare to find foreclosures - and still solid areas to invest in and live.   

- Is it still possible to make a profit by flipping?

Of course, but you have to be super smart about it.  You have to be careful about what you pay for the property, how much you put into it, how long you hold it, and how you price it to sell.  There is a ton of competition for great investment proeprties, so the best thing to do is set up an automatic search that will send you new listings the day that they hit the market.  If you see something that looks like a good investment, don’t wait - make an offer.  And create a net sheet that will allow you to project your profit so that you can budget for the flip accordingly.

Finally, some news that investors will benefit from!  Fannie Mae is shaking things up to get the market moving, and removing some of the ridiculous guidelines that barred some investors from helping the housing market to recover.  This is the beginning of the official announcement from Fannie herself:

 Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation’s housing system.limits the number of one- to four-unit financed properties in which the borrower may have an individual or joint ownership interest to four financed properties when the mortgage being delivered to Fannie Mae is secured by an investment property or second home.  The limitation on the number of mortgages currently being financed applies to the total number of properties financed, not just the number of mortgages sold to Fannie Mae. Fannie Mae is modifying this policy to allow investor and second home borrowers to own five to ten financed properties if they meet certain eligibility and underwriting and delivery requirements…

Read the rest here.

From NAR…

Pending home sales increased as more buyers took advantage of improved affordability conditions, according to the National Association of Realtors. Big gains in the South and Midwest offset modest declines in other regions.

The Pending Home Sales Index,a forward-looking indicator based on contracts signed in December, rose 6.3 percent to 87.7 from an upwardly revised reading of 82.5 in November, and is 2.1 percent higher than December 2007 when it was 85.9.

Lawrence Yun, NAR chief economist, said the index shows a modest rebound. “The monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month,” he said. “The biggest gains were in areas with the biggest improvements in affordability.”

NAR’s Housing Affordability index rose 10.9 percent in December to 158.8, the highest on record. The HAI shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.

“Significant uncertainty still clouds the housing market despite improved affordability conditions. For a sustainable housing market recovery and, hence, sustainable economic recovery, we need a significant housing stimulus and mortgage availability for qualified borrowers,” Yun added.

The PHSI in the Northeast slipped 1.7 percent to 62.1 in December and is 14.5 percent below a year ago. In the Midwest the index jumped 12.8 percent to 83.7 but remains 1.2 percent below December 2007. The index in the South surged 13.0 percent to 96.8 in December and is 1.6 percent above a year ago. In the West, the index fell 3.7 percent to 97.5 but remains 17.5 percent higher than December 2007.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the rise in contract signings is encouraging. “However, housing activity remains weak compared with potential demand, and the market is fragile given the economic backdrop,” he said.

“We can’t take our eye off the need to stimulate housing, which can set the foundation for an economic recovery,” McMillan said. “Last week’s actions in the House to eliminate the repayment feature on the first-time home buyer tax credit, and to raise mortgage loan limits, are helpful. However, we need to take additional steps to meaningfully draw down inventory and stabilize home prices.”

McMillan said some enhancements that could bring more buyers into the market include expanding the $7,500 tax credit to all home buyers and extending it until the end of 2009, and making loan limit increases permanent. “We also need to direct funds in the Troubled Asset Relief Program to add liquidity to the mortgage market, buy down mortgage interest rates and increase other forms of credit,” he said.

Yun said the outlook for housing and the economy is murky. “Although Congress and the Obama administration are taking steps to help the economy, the stimulus package must deal with the root cause of the economic downturn, and apply the right fix to turn it around. If housing is ignored, a significant downward overshooting of home prices would continue to drag the economy down independent of the scale of the stimulus,” Yun said.

From CNN.com…

If you’re thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that’s now before Congress.

Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week.

Technically, the stimulus bill is actually changing the terms of the $7,500 tax credit that was issued as a part of the Housing Recovery Act, which Congress passed last summer. That legislation required that the tax credit be repaid over 15 years, making it more of a no-interest loan. Not surprisingly, the measure had little impact on the market. The stimulus bill now under consideration would make that tax credit a true credit that doesn’t need to be repaid.

Many in the housing industry believe this credit could do a lot to jump start the moribund housing market.

“Our economists have studied the effect [of the credit] and they say there could be a 10% increase in home sales if it’s implemented,” said Mary Trupo, a spokeswoman for the National Association of Realtors. “It gives people who are sitting on the fence or who have inadequate funds for closing costs an incentive to act now.”

A 10% increase would yield an extra half million sales this year.

To be eligible, buyers cannot have owned a home for the past three years, and the new home has to be used as a primary residence. The credit phases out as income rises above $75,000 for singles and $150,000 for couples, and disappears entirely at $95,000 and $170,000, respectively.

Applying for it is easy, or at least as easy as doing your income taxes. Just claim it on your return. That’s it. No other forms or papers have to be filed.

Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don’t sell for at least 36 months, they keep the money.

And the credit is refundable, meaning that it can be claimed even if the amount of the credit earned exceeds the buyer’s tax liability. So even if your total tax bill comes to just $5,000, you can still qualify for a full $7,500 refund.

The housing industry has been pushing this idea for many months, arguing that first-time homebuyers are the key to boosting home sales. First time buyers who purchase from existing homeowners free those sellers to trade up to bigger, better houses.

But the credit has its drawbacks, according to Bob Williams, a spokesman for the Tax Policy Center, which gave it a mediocre C+ grade in its Tax Stimulus Report Card.

Williams argues that the credit is poorly targeted because it goes to every first-time buyer, not just the ones who wouldn’t buy without it. So, it merely provides a windfall for many people who would have purchased anyway. (See correction, below).

And in the end, a $7,500 tax credit, regardless of the details, does nothing to address the issue that’s holding most buyers back - the suspicion that prices are going to keep falling.

“As long as people are uncertain about what markets are going to do, this won’t help much,” said Williams. “It’s not enough to change that.”

The industry would like to make the tax credit stronger by making it available to all homebuyers, not just first-timers. And it’s pushing to have the credit last through the end of the year, at least.

“By the time it’s implemented,” said Trupo, “there could be very few months left to act.”

From today’s Urban Eye…

http://www.bcycle.com/b_knowledge/

Alright Denver, prepare to do your best Lance Armstrong impersonation. Mayor John Hickenlooper and several community partners today announced plans for a citywide bike sharing program - Denver B-Cycle - that will make 500 bikes available to the public at 30 to 40 stations throughout the city beginning this summer. Denver will be one of the first cities nationwide to launch such a comprehensive bike sharing program, which will be funded initially with a $1 million donation from the Denver 2008 Convention Host Committee. The B-Cycle Citywide Bike Sharing Program will focus initially on the Downtown Denver Central Business District, University of Denver campus and adjacent neighborhoods. The bike stations will be situated in a three to four mile radius of Downtown Denver and integrated with the existing multi-modal transit system, including the 16^th Street Mall, Denver Union Station, Market Street Station and FasTracks. The program is expected to double in size to more than 1,000 bikes by Spring 2010. While no one will be climbing the French Alps or recklessly racing toward the finish line for the yellow jersey, we will be taking a momentous step toward a more environmentally- friendly and sustainable Downtown.

 Visit http://www.bcycle.com/ for more information.

In today’s Rocky…

Homes in the Denver area lost $17 billion in value in 2008 from 2007, according to a national report released today.

The report by Seattle-based Zillow.com, which tracks a variety of real estate data, showed home values dropped 7 percent last year, with the median, or middle price, falling to 2002 levels of $207,688.

In addition to homes that sold, Zillow.com’s data include homes that were not sold and were not on the market. For example, last year Realtors sold about $12 billion of homes in the metro area, about $2 billion less than in 2007. At the end of last year, the total value of all homes in the Denver area stood at $214 billion, according to Zillow.com.

Nationally, home values plummeted 11.6 percent in 2008 from 2007 in the 161 metropolitan areas tracked by Zillow.com.

In the Denver area, Zillow.com says 44.5 percent of the homes closed last year sold for a loss, and foreclosures accounted for 19.7 percent of all the transactions. In addition, 33 percent of the homes have mortgages worth more than the homes.

“It sounds pretty accurate to me,” said Ron Woodcock, a broker with RE/MAX Southeast. “But we’re still way ahead of places like Florida, where I came out of and still have family.”

In the Orlando area, for example, he has family members knocking $50,000 to $75,000 off homes priced in the $250,000 range and they still have trouble selling them.

Zillow.com found that only two neighborhoods in the Denver area gained value from 2007 to 2008.

The Highland neighborhood was No. 1, gaining 1.5 percent, while City Park rose by 0.5 percent. The worst-performing neighborhood on a percentage basis was Morris Heights, which includes North Aurora, which lost 15.4 percent.

John Skrabec, principal of Live Urban Real Estate in West Highland, said he isn’t surprised the northwest Denver neighborhood was on top.

“I think it is all about location and an urban kind of excitement,” Skrabec said. He said there is a “real lack of inventory” of homes priced from $250,000 to $400,000 in Highland and West Highland.

Deviree Vallejo of Kentwood City Properties also said she isn’t surprised that Highland appreciated more than any other neighborhood.

“It’s so funny there are all of these different reports that look at the market in different ways, and the one constant is that Highland is always up,” Vallejo said.

Where would Americans most like to live — and how do they feel about the place they currently call home?

A new national survey by the Pew Research Center’s Social & Demographic Trends project finds that nearly half (46%) of the public would rather live in a different type of community from the one they’re living in now — a sentiment that is most prevalent among city dwellers. When asked about specific metropolitan areas where they would like to live, respondents rank Denver, San Diego and Seattle at the top of a list of 30 cities, and Detroit, Cleveland and Cincinnati at the bottom.

Even though the survey shows that many Americans have a bit of wanderlust, it also finds that most are satisfied with where they live now. More than eight-in-ten rate their current communities as excellent, very good or good. People who have moved at least once (63%) and those who have lived in the same place all their lives (37%) are equally content with their current home.

These findings emerge from a wide-ranging telephone survey of a nationally representative sample of 2,260 adults, conducted Oct. 3-19, 2008. An earlier report,1 based on other questions from the same survey, found that nearly one-in-four adults (23%) say the place in their heart they consider home isn’t where they are living now. That report also cited Census Bureau data indicating that Americans are changing residences less often than they used to: Only 11.9% moved between 2007 and 2008, the lowest share since the government began tracking this measure in the late 1940s.

This latest report explores a range of attitudes related to where Americans live, where they would like to live and why. It finds that most city dwellers think the grass would be greener in a suburb, small town or rural area. But urbanites aren’t alone in feeling mismatched with their surroundings. More than four-in-ten residents of suburbs, small towns and rural areas also report they would prefer to live in a different type of community.

Who We Are Shapes Where We Want to Live

Some notable demographic and ideological patterns emerge in the survey responses. For example, most young urbanites consider cities the place to be, while most middle-aged urbanites would like to live elsewhere. Seven-in-ten rural men are content where they are, compared with just half of rural women. Most rural conservatives feel right at home; most urban conservatives don’t. But urban liberals do.

Demographics and political views also help shape people’s taste for specific cities. Many more young adults than older adults are drawn to New York and Los Angeles. More men than women want to live in Las Vegas. Well-to-do adults are twice as likely as the less affluent to want to live in Boston. Republicans think Phoenix would be a great place to call home. Democrats feel the same way about San Francisco.

Geography matters, too. Seven of the public’s 10 most popular big cities — Denver, San Diego, Seattle, San Francisco, Phoenix, Portland and Sacramento — are in the West, and the other three — Orlando, Tampa and San Antonio — are in the South. The five least popular big cities — Detroit, Cleveland, Cincinnati, Kansas City and Minneapolis — are all in the Midwest. These attitudes reflect what government data indicate about the nation’s migration patterns: Americans are leaving the Northeast and the Midwest in favor of the South and the West.

Other survey findings include:

• Americans are all over the map in their views about their ideal community type: 30% say they would most like to live in a small town, 25% in a suburb, 23% in a city and 21% in a rural area.
• By a ratio of more than three-to-one, Americans prefer living where the pace of life is slow, not fast. A similarly lopsided majority prefer a place where neighbors know each other well to one where neighbors don’t generally know each other’s business.
• By about two-to-one, they prefer to live in a hot-weather place over a cold-weather place.
• On the food-and-drink front, a slight plurality would rather live in a place with more McDonald’s (43%) than one with more Starbucks (35%).
• About seven-in-ten whites rate their current community as “excellent” or “very good”; only about half of Hispanics and four-in-ten blacks say the same. Rural and suburban residents rate their communities better than do residents of cities and small towns.
• People who live in a city — as well as people who want to live in a city — are more open than others to the idea of living with neighbors who are of different races. They are also more open to living among immigrants. 
• When it comes to community involvement, there is no difference among those who live in cities, suburbs, small towns or rural areas. About half of the residents in each place say they are involved, and half say they aren’t.