Act fast! Homebuyer tax credit ends soon -CNN

NEW YORK (CNNMoney.com) -- Use any metaphor you want: the ticking clock, sands running through the hourglass or pages falling away from the calendar. The fact is, time is running out to claim the $8,000 first-time homebuyerstax credit.

Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.

The bad part: It ends on Dec. 1.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.

"Buyers have to get a home under contract very, very soon," said Tom Kunz, CEO of Century 21. "They probably should get out looking."

Sense of urgency

What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range.

In Whittier, Calif., for example, there are few repossessed homes for sale. Those are easy to buy because there isn't a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe.

"That's why there's such a sense of urgency now," said Irma Tapper, a Century 21 real estate agent in Whittier. "The banks have to approve short sales, and they're taking three to six months to do that."

That means a first timer putting a bid on a short-sale might not get an answer form the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy.

Chuck Whitehead, who runs the Coldwell Banker agency in Temecula, Calif., said one recent listing hit the market on a Friday and by Monday there were 57 bids.

The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn't have been able to buy without it.

"It makes a big difference because most of these clients are in a lower price range," said Michelle Edmunds, an agent with Coldwell Banker in Temecula, Calf., who has closed sales for six first-time buyers. "The houses they buy need work and normally they wouldn't want to move in because of the [less than perfect] conditions the homes are in."

That is true for Wesley Forsythe. This June, the 30-year-old computer consultant and his girlfriend bought a row house in the Fishtown section of Philadelphia. Since he paid just $80,000 for the three-bedroom, two-bath place, the credit acted like a 10% discount.

"It allowed us to expand our price range and plan additional renovations," he said. "My mortgage is several hundred dollars less than what my new rent would have been."

Forsythe applied for the credit immediately after closing, filing an amended 2008 tax return. The IRS cut him a check in less than seven weeks. He's spending it now on new hardwood floors, repainting most of the interior and renovating a bathroom. He's stretching the cash by doing much of the work himself.

Cash for Clunkers effect

Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.

In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program.

"It's just like Cash for Clunkers," said Robert Dye, a senior economist for PNC Financial Services Group. "It runs the risk of a let-down as the program runs its course."

Johnny Isakson, R-Ga., who is a former real estate broker, is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions.

The effort has drawn strong industry support.

"We need to stimulate the move-up buyer," said Century 21's Kunz, "so it works its way up the pricing food chain. That's what we need to get inventory moving again."

$8,000 Tax Credit Boosts California Home Sales

The first-time homebuyer tax credit played a major role in boosting home sales in California last month, according to C.A.R., the California Association of Realtors. Last month, existing, single-family home sales increase 12 percent from July 2008; they were up 8.1 percent from June.

“The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” said C.A.R. President James Liptak. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered.

“Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline, and includes all buyers, not just first-timers. Meanwhile, the median price of an existing single-family home increased 3.9 percent from June to $285,480, though prices were still off 19.6 percent from a year earlier.

“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.”

New Home Sales Jump 9.4% in July

Data suggesting that the economy is stabilizing continues to pile in this week, most recently in the housing market. New Home Sales advanced by 9.6% in July, beating expectations for a 5% increase and following up on a 9.1% advance in the prior month.

July marks the fourth consecutive monthly increase, pushing the annual pace of sales to 433,000 -- the first time same sales have passed the 400k mark since October. The annual rate is still 13.4% below the pace in July 2008, yet that compares nicely with the 19.1% annual decline reported in June.

“This report was surprisingly strong, and helps to further the story that the U.S. housing market has now reached a stabilization point,” said Ian Pollick, strategist at TD Securities. He added that “housing conditions remain favorable due to low mortgage rates, deep discounts and a rosier economic outlook.”

Excess overhang also got slashed by an entire month’s worth. At the current sales pace there are 7.5 months worth of inventory on the market, compared with 8.5 months in June. Overhang peaked in January at 12.1 months, and then fell in four of the past five months.

According to analysts at RDQ, the number of unsold new homes, in absolute numbers, is the lowest since March 1993.

The report carried plenty of revisions, but all were positive. The sales pace in June was revised up 11k to 395k, while May is now 362k (from 346k), and April is now 345k (from 338k).
“The fact that there were upward revisions to the prior three months and July's gain is the fourth in a row speaks volumes to the housing recovery,” commented Jennifer Lee from BMO.

Sales in the Northeast advanced by nearly one-third (32.4%), while sales in the South climbed 16.2%, and sales in the West inched up 1%. In the Midwest, however, sales dropped 7.6%.
As for housing prices, the median during the month was $210,100, about equivalent to the figure in June and broadly in line with prices seen in 2009.

Market reaction was immediate: equities were unmoved earlier in the morning when Durable Goods posted a positive, albeit lopsided, surprise. But minutes after the housing data all three major indexes jumped forward into the green.

California Home Sales Up

The median price for a California home increased for the third straight month in July, according to DataQuick. Last month, the median price inched up to $250,000, up 1.6 percent from $246,000 in June, but remains 21.4 percent below the $318,000 median seen last year.
Unfortunately, the slight uptick in median home price was attributable to the sale of more expensive homes, and not necessarily any sign of a recovery.

Of exiting homes sold last month, just 43.7 percent were previously on in the past year, the lowest percentage so far this year. A year ago, the share of previously foreclosed was 42.5 percent, with such sales peaking at 58.8 percent back in February of this year. Both new and resale home sales, which totaled 45,079, increased 2.1 percent from June, and were up 14.1 percent compared to July 2008.

Sales have now increased on a year-over-year basis for the past 13 months; last month’s sales were the highest for any month since August 2006. In the Bay Area, homes sales hit a four-year high last month as transactions above the $500,000 mark increased and low-cost foreclosures dried up.

Case Shiller: Home Prices Up Again

Home prices across the United States are stabilizing, according to an industry survey that found price declines moderating at a quicker pace than expected in June.

The S&P Case-Shiller Home Price Index said its survey of 20 metropolitan cities found prices moving upwards for the second consecutive month. Prices in June moved up 1.4%, following a 0.5% uptick in May, with 18 of the 20 metropolitan areas seeing improvement. That put the annual decline at -15.4%, in contrast to expectations of a 16.5% figure. The record decline was back in January when the annual drop was -19.2%.

“Home prices are still waging an uphill/upstream/against the wind battle with the still-high number of foreclosure activity,” said Jennifer Lee, economist at BMO Capital Markets. “But all in, this is another piece of positive news giving support to the view that U.S. house prices are stabilizing.”

For the second quarter, home prices are down 14.9% from Q2 2008. That’s a big decline from last year, but in Q1 the annual decline was -19.1%, so the downward trend is moderating rapidly. “This is the first time we have seen a positive quarter-over-quarter print in three years,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s.
“As seen in both seasonally adjusted and unadjusted data, as well as the charts, there are hints of an upward turn from a bottom,” Blitzer added. “However, some of the hardest hit cities, especially in the Sun Belt, show continued weakness.”

Since housing prices peaked three years ago, average home prices have fallen 30.2%. The nation’s worst declines are in Las Vegas and Detroit ― the only two markets that continued to fall in June. Since the peak, average home prices have fallen in those cities by 54.3% and 45.3%, respectively.

“In spite of the recent positive data, the overall numbers remain weak, with all metro areas and the two composites posting negative annual returns, and 15 out of the 20 metro areas reporting double digit annual declines,” the report said.

Going forward, TD senior strategist Eric Lascelles said “it is still an open question whether home prices will manage to increase in each and every month going forward, but the foundation has at least been laid.”

New Bill to Extend $8,000 Credit

If Congress enacts legislation currently in front of the House Ways and Means Committee, the current popular First Time Home Buyer Tax Credit will be extended beyond its current expiration date and greatly expanded.

The Home Ownership Moves the Economy (HOME) Act of 2009, introduced by Howard Coble (R-NC) would continue the availability of the credit into 2010 and allow all home buyers to take advantage of the program. The credit is due to expire on December 1, 2009.

The current legislation grants a one-time credit of 10 percent of the home’s purchase price up to a maximum of $8000 to first time homebuyers or those buyers who have not owned a house in the last three years. Homebuyers can chose to claim the credit either retroactively on their 2008 return or on their 2009 obligation. If the buyer does not owe enough taxes to cover the credit the balance will be refunded to them in cash.

The full tax credit is available to U.S. citizens with incomes under $75,000 or $150,000 for couples filing jointly and a reduced credit applies to buyers with incomes up to $95,000 and $170,000. Unlike an earlier housing stimulus program, the credit does not have to be repaid unless the homeowner sells the house in less than three years.

Congressman Coble’s legislation would remove both the income restriction and the requirement that the home be a first-time purchase.

There have been calls from a number of quarters, to extend the program to buyers who close on a house beyond the current December 1 deadline. The National Association of Realtors and the National Association of Homebuilders among other credit the program at least in part with the recent rebound in housing sales.

The homebuilders group has been urging its members to lobby for just such a program as that proposed by the Home Act claiming that were the tax credit to be extended one year and made available to all home buyers it would increase home sales by 383,000 units and create nearly 350,000 jobs.

No HVCC for FHA

The Federal Housing Administration has no plans to implement the Home Valuation Code of Conduct (HVCC), said Commissioner David Stevens to a delegation from the National Association of Mortgage Brokers (NAMB).

Stevens said that he was well aware of the problems originators have been having with the code, and that FHA is not considering adopting the appraisal system now in place at Fannie Mae and Freddie Mac. However, HUD is looking at alternatives that will insulate appraisers against inappropriate pressure said a statement from NAMB.

NAMB’s statement also said that FHA is concerned about potential loses in the reverse mortgage (HECM) area. HUD says that due to declines in home values, variable rates, and the fact that people are living longer, they may be forced to change the program.

HUD also intends to issue new directives on appropriate advertising for HECMs (about time). They are concerned that some advertising promotes seniors using the cash from their residence and spending it on vacations and expensive personal items. A Mortgagee Letter on HECMs is expected within 60 days.

Foreclosures Jump in July

Foreclosure filings continued to increase in July according to figures released today by RealtyTrac, a California company which claims ownership of the country’s largest data base on foreclosure activities.

Foreclosure filings which include default notices, scheduled auctions and actual foreclosure sales were reported on 360,149 properties in the United States, an increase of nearly 7 percent over RealtyTrac’s June figures and a 31 percent jump from reported numbers one year ago. According to RealtyTrac nationally one in every 355 housing units received a foreclosure filing in July.

This is the third time in five months that RealtyTrac figures have set a new record for foreclosure activity.James J. Saccacio, chief executive officer of the company said in a press release, “Despite continued efforts by the federal governments and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

As it has for the last 31 months, Nevada has topped the states in reported foreclosures with 7139 initial foreclosure notices sent; a rate of one for every 56 housing units. This is over six times the national average. Because of a new state law effective July 1 that requires lenders to offer mediation to homeowners before beginning legal action, initial notices decreased 18 percent from June figures. However properties further along in the process increased more than 20 percent for the month. According to the data, nearly 20,000 homes are in some stage of foreclosure in this small state.

California recorded the second highest rate with 108,104 homes in foreclosure, one out of every 123 housing units. Initial filings increased 15 percent over June.Other states ranking high based on the rate of foreclosure are Arizona with one in every 135 houses affected; Florida, 1 in 154, Utah, 1 in 250, and Idaho with 1 in 253.

Four states, all of them big beneficiaries of the real estate boom that ended two years ago, represent most of the actual foreclosure numbers. Taken together, California (108,104), Florida (56,486) Arizona (19,694) and Nevada (19,535) have 57 percent of the total properties in the nation.

According to RealtyTrac, there was a drop in the rate of foreclosures between June and July in 11 states. The largest decrease was in Rhode Island, down 44 percent followed by Michigan with about 40 percent fewer actions and Mississippi, down 37 percent. Michigan’s decrease was at least partially due to new legislative action that required lenders to take additional steps to protect homeowners, thus slowing the process. Georgia, which leads the country in bank failures and ranks 7th in the rate of foreclosures, enjoyed a 20 percent drop in the foreclosure rate in July.

Ginnie Mae President Resigns

Mortgage News Daily is reporting that the President of Ginnie Mae, Joseph Murin, has submitted his resignation.

Murin's resignation follows the August 6, 2009 departure of Federal Housing Finance Agency Director James Lockhart. In Lockhart's statement to the public he mentioned that since his tenure began in May of 2006 he had seen the housing market through one of the most difficult periods in history and that it was time to "move on to the next chapter" as the GSEs are now strongly supporting the housing stabilization.

Joe Murin was sworn in as the 16th President of Ginnie Mae on July 7, 2008. In Murin's first public press release after being sworn in he stated...."This is a critical time in the housing industry, it is clear that the market needs safety and security and that is exactly what Ginnie Mae offers - reliable mortgage securitization products that are backed by the full faith and credit of the U.S. As president, I will make sure Ginnie Mae works hard to bring stability back to the industry."

During his tenure Murin successfully kept his promise of increasing access to affordable home funding for low- to moderate-income families and fostering stability at a time when the access to private funding in the secondary market dissolved.

Over the past year Ginnie Mae has expanded its participation in the mortgage market considerably. For the first six months of 2009, Ginnie Mae provided nearly $207 billion of liquidity to the secondary market, $100 billion more in loan fundings compared to the first six months of 2008 when Ginnie Mae securitized $107 billion in loans.

In June of 2009 Ginnie Mae issued a record $43 billion in mortgage-backed securities (MBS). In total, this year Ginnie Mae is expected to provide over $1 trillion in support to American homeowners looking to purchase a new home or refinance out of a higher costing mortgage payment.

Sources cite there are no negative connotations behind Murin's resignation and that these plans have been in the works for a matter of weeks. Murin is planning to remain deeply involved in the housing and financial services sector. More details expected next week.

Zillow Sees Housing Stabilization in 2Q

Zillow is seeing a few pinpricks of light among continuing dark news about residential sales.

The Seattle-based real estate services company provides on-line information on home values in a number of markets based on a metric using information on recent sales and data on local assessments to compute “Zestimates” which are used by consumers to judge the value of their homes and those of their neighbors.

Based on its huge data base the company also provides a quarterly Home Value Index which its press release compares to the Case-Shiller and Federal Home Finance Agency reports.

The second quarter 2009 report was released on Tuesday. It reported that, while home prices have continued to fall for the 10th quarter in a row, the rate of decline has flattened significantly.

U.S. home values were down 12.1 percent year-over year to an index average of $186,500. This is a smaller year-over-year change than the 12.4 percent decline reported for Quarter 1 and much of those losses occurred early in the quarter. Prices fell less than 1 percent from May to June.

Total home sales were down 23.7 percent in June compared to June, 2008 but sales were actually 3.8 percent higher in June than in the previous month.

The Zillow data covers 161 metropolitan statistical areas. In 39 of these markets home sales year-over year increased and in 142 markets the rate of declining sales has been lower than the previous reporting period for at least three consecutive quarters. Of the 39 markets marking increases, some such as Miami-Fort Lauderdale, Los Angeles, and Phoenix were among those hardest hit when the market crashed.

There was not, however, good news everywhere.

Zillow reported that 22 percent of all sales in June were of properties that had been foreclosed by a lender and 29.2 percent of homes sold that month brought in less than their owners had paid for them. Even homeowners who are staying put are still being hit hard; Zillow reported that 23 percent of all owners of single family homes owe more on their mortgages than their homes are worth.

One of Zillow’s more interesting findings was the amount of pent-up inventory that may be waiting in the wings. 29 percent of the homeowners who responded to the Homeowner Confidence Survey portion of its report indicated that they would be somewhat likely to put their homes on the market if they saw signs of improvement.

Stan Humphries, Zillow chief economist commented, "While we are encouraged by the increasing sales in many markets and the overall improvement in the rate of decline of the Zillow Home Value Index, I hesitate to be overly optimistic for the near future. There are still many hurdles to true market recovery. Foreclosure re-sales are buoying overall sales numbers, but their low prices are keeping home values down. Reports of increasing mortgage defaults signal that foreclosures are likely to increase again and peak in mid-2010. With increasing unemployment and high rates of negative equity, we have a fertile breeding ground for even more foreclosures, which add to the already-high level of for-sale inventory that needs to be cleared before values begin to rise.

"While the abundance of affordable foreclosure properties is a boon for many first-time homebuyers, I don't believe we'll see significant recovery until demand-side fundamentals improve, and more move-up and move-across buyers re-enter the market."

Fannie Mae Posts 8th Straight Loss

Fannie Mae posted a net loss of $14.8 billion in the second quarter, following up on a deficit of $23.2 billion from the first three months of the year, it was reported Thursday. Taken together, the two quarters have created a hole so large that the government-sponsored mortgage lender will have to fill it by a third round of rescue funds from the Treasury.

The bleak results were driven by nearly $19 billion of credit-related expenses, reflecting the ongoing impact of adverse conditions in the housing and labor markets.

The losses were partly offset by fair value gains. Net revenue was $5.6 billion in the quarter, up 8% from Q1, with net interest income at $3.7 billion, up 15% from the prior quarter, and guaranty fee income at $1.7 billion, down 5% from Q1.

After the Q2 results were posted, it was announced Fannie would seek an additional $10.7 billion from the Treasury to cover a net deficit of $10.6 billion. The Federal Housing Finance Agency, which oversees Fannie, has requested that Treasury provide the funds by September 30, 2009.

According to the Washington Post, the Treasury has pumped $85 billion of equity into Fannie Mae and Freddie Mac, the smaller government-sponsored enterprise. (Together, the two GSEs own or guarantee $5.5 trillion in U.S. mortgages). In addition, the Federal Reserve and the Treasury have bought more than $800 billion of their debt.

“Fannie Mae is continuing its efforts to support the housing market by working with lenders, loan servicers and the government to help homeowners avoid foreclosure and provide liquidity to the mortgage market,” the GSE said in a statement. “We have focused our foreclosure-prevention efforts on the implementation of the Making Home Affordable Program, which is designed to significantly expand the number of borrowers who can refinance or modify their mortgages.”

This is Fannie’s 8th straight quarterly loss. Looking ahead, the company noted “there is significant uncertainty as to our long-term financial sustainability.”

To continue operations, Fannie said it was crucial to continue receiving government assistance.

“We believe that our status as a government-sponsored enterprise and continued federal government support of our business and the financial markets is essential to maintaining our access to debt funding, and changes or perceived changes in the government’s support of us or the markets could lead to an increase in our debt roll-over risk in future periods and have a material adverse effect on our ability to fund our operations.”

There has also been talk of splitting up assets held by the two GSE’s, so that failing assets could be slowly unwound while assets performing well could be the foundation for a newly-created institution. The White House, however, dismissed those rumors on Thursday.

Pending Home Sales Jump

Pending Home Sales were expected to advance for the fifth straight month in June, but the gain was supposed to be meager. Instead, sales jumped 3.6% in the month, “trashing expectations of a 0.6% gain,” as one analyst put it.

The index hasn’t seen five months of consecutive increases since 2003, providing further confirmation that the real estate market is stabilizing, slashing excess overhang, and preparing for recovery. Moreover, gains were widespread, with all four regions posting an advance in the month. Sales in the South leapt 7.1%, while the West bumped up 2.9%, the Midwest climbed 0.8%, and in the Northeast sales inched up 0.4%.

“Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who’ve been on the sidelines,” commented Lawrence Yun, chief economist at the National Association of Realtors, who publish the survey.

Millan Mulraine, strategist at TD Securities, estimates that 80% of pending home sales are actualized within two months, which “suggests that the upward momentum in U.S. housing market activity may have gathered a bit of steam in June.”

Jennifer Lee from BMO Capital Markets added: “At the risk of being accused of being too optimistic, the bottoming process for the housing market has formed.” Annually, the level of pending sales is now 9.2% above the level one year ago.

Looking forward, Yun said existing home sales should gradually rise over the year, with conditions varying around the country. “It appears home sales are on a sounder footing and inventory is gradually being absorbed.”