The Bottom Of The Market Feels Like A Bumpy Road

It’s the New Year, and just in time the banks are raising interest rates, but just a little – so far. However, the banks are also relaxing their down-payment requirements because they are seeing increased confidence in the housing market. The truth, according to one banker friend I spoke with is because they are not making any money. They need to make loans to make money. In some markets borrowers can now borrow 95% of a property’s value. Of course one would hope this means property values are not going down any further and loan applicants are going to be scrupulously vetted?

Despite favorable sales figures as we finished out this year, Tim Warren Jr., CEO of the Warren Group sees home prices bouncing up and down along the bottom during the next 3-6 months, and possibly throughout most of 2010 even though sales figures will appear to continue trending positively. This is the way it was in the early 90’s as we pulled out of the last recession. Some economists call this an “L” recession. For sure the recovery is going to be slow, but I do think it is safe to say we are at the bottom albeit a bumpy bottom. I believe in making a decision about when is the best time for you to buy an investment property one indicator you should pay attention to is interest rates. When interest rates go up this can herald the onset of an inflationary period.

Warren feels it was the rush to take advantage of the initial first-time home buyer tax credit by signing contracts before November 2009 expiration that contributed the biggest boost to the market. Wednesday’s WSJ reported that first-time buyers made up 51% of purchases in November, according to NAR. The initial first-time home buyer tax credit has been extended and broadened to include more potential buyers which may once again give a boost to the housing market. Contracts have to be signed by April 30, 2010 with closing dates on or before June 30, 2010. According to Carl Reichardt, an analyst with Wells Fargo, “The spring selling season would be critical to determining whether a possible double-dip is at hand, or whether housing’s recovery will regain steam.”

Tim Warren believes another reason for the upturn is the brighter unemployment figures in Massachusetts which in turn enhance consumer confidence. Okay, but one of my sources tells me the actual national unemployment figure is above 17%, if you factor in the non-registered ‘shadow’ unemployed.

News Flash: Massachusetts unemployment rate drops slightly from 8.9% to 8.8%
Read about it here > http://www.businessconnector.biz/news/show/523

In January, it is predicted that 1,000,000 unemployed workers will lose their benefits. Another prediction is going to be a surge in commercial foreclosures as more companies lay off workers and close doors in leased office spaces. But who knows? I still believe in miracles.

Great News for Martha's Vineyard Home Buyers!

First-Time Home Buyer Tax Credit

President Obama signed the Homebuyer Tax Credit into law after overwhelming votes for it in Congress. The credit takes effect as of November 6, 2009. To be eligible, a purchase contract must be signed by April 30, 2010, and close on or before June 30, 2010. This is a very narrow window of opportunity so pay attention and don't miss out.

Not only is the existing $8,000 tax credit for first-time homebuyers extended but a new "Homebuyer Tax Credit" of up to $6,500 for some existing homeowners has been added. The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.

The qualifying income limits are being raised to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.

Martha’s Vineyard Land Bank “M” Exemption

In an effort to stimulate home sales to first-time home buyers, the Martha’s Vineyard Land Bank has increased the credit amount of the “M” Exemption. The “M” Exemption is a credit given only to eligible first-time home buyers toward the Land Bank Fee of 2% of the purchase price of real estate on Martha’s Vineyard.

Prior to September 1, 2004, the “M” exemption was $100,000 and in order to qualify all parties on the deed may not have ever owned real property at any time, not just on Martha’s Vineyard but anywhere. Subsequently, it was increased to $300,000 and the exemption was available to first-time purchasers of real estate who will domicile on the property within two years and hold the property for at least five years from the date of transfer. In the case of spouses, either spouse can have owned or possessed an interest in real property prior to the time of purchase, but not both spouses. As of October 27, 2009, per a recent amendment to the land bank law, first time purchasers may now claim a $400,000 "M" exemption. All of the other requirements of the "M" exemption are unchanged.

Mortgage Interest Rates Remain Below 5%

Although inflation is an assumed and anticipated part of our future economic recovery, the Fed anticipating continued slow growth during the next few months voted the status quo for interest rates with their announcement this week that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." Rates will stay where they are for now because the Federal Reserve group believes that even with economic growth ahead, it will be at a manageable pace.

On Martha’s Vineyard, for loans up to $417,000 you can get a 15-year fixed rate mortgage for 4.5%, with no points and a 30-year fixed with one point for 5.1%. 30-year loans are actually down by an eighth of a point at maturity.

Senate Moves to Expand Tax Credit as High as $15,000

This could be an excellent incentive for some home buyers on Martha’s Vineyard who can qualify. Currently, the maximum tax credit is $7500 and that is only for first time home buyers, but if this new amendment approved by the Democratic Senate passes the House and goes into effect, buyers who are purchasing a home as their primary residence, regardless of whether they are first time buyers or not, will receive a $15000 tax credit or 10% of the home purchase price, depending upon whichever is less. The tax credit will be in effect for one year.