Real Estate Market Update - Some Markets Red Hot Others Ice Cold

It's April 15th and the first thing we'd like to do is have you read no further and go pay your taxes if you have not already. Now then , let's get to the fun stuff. The real estate market across Los Angeles and Orange Counties seems to be a hot topic and nobody can seem to get a straight answer when it comes to its' condition. Here's what we can tell you from our "boots on the ground" experience.


Hot Markets

Entry level single family residences - Without a doubt the hottest selling market in the area is that for entry level homes. In particular, single family residences priced between $250,000 and $350,000. This is the same market that was the hottest selling during the boom days and the same that has been hit hardest by foreclosure. Most of the property in this price range is some sort of distress sale, whether it be bank owned or short sale. Homes priced well for their features are seeing multiple offers, overbids, and short market times. These homes are selling so well because of three factors:

1. The banks are pricing them ultra aggressively.
2. The monthly payments on these homes often makes more sense than renting so we're seeing a boom of first time buyers. With interest rates around 4.5-4.75% and the potential for $8,000 in tax credit, and homes selling for nearly half price, this is no surprise.
3. Investors (not to be confused with speculators) are reappearing in the market to snatch these homes up with cash-heavy offers and turn them into income-producing rental properties.

Any Lower Priced Neighborhood - From Santa Ana to Long Beach, Downey to Anaheim, the story remains the same. If the neighborhood is seen as "affordable", and had substantial sales activity due to sub prime mortgages, it is sure to again be a hot-selling neighborhood. Only now, the prices are nearly half of what they were previously selling at.

Luxury Real Estate - Guess it goes without saying that those who are able to afford estate property aren't terribly concerned with the absence of 100% financing. Low interest rates and realistic pricing on these homes have helped the luxury market to see an increase in sales activity. Again, it pales in comparison to the entry level market pace but its still a better market than many think.




Cold Markets

Mid-Range Housing - While it may not be seeing the largest amount of price drops, the coldest market has to be homes falling somewhere between upper-end and entry-level. There just is not a lot of action on these homes for a few reasons:

1. There are less foreclosures in this price range; therefore, less motivated sellers. Despite possibly being "upside down", owners are looking to hold on to their homes and ride out the market cycle. (Something many owners in the entry-level market are not able to do.)


2. This segment of the market relies on people in the entry-level market moving up to the mid-range in order to spur home sales. Without a large pool of owners in the entry-level market with equity AND the need to sell, the mid level just isn't seeing many of the step-up buyers.


3. Lateral moving buyers (or buyers moving from one house to a similar priced house, just in a different location) are the majority of the buyers in this market. The problem is that these people will face the same issues with sale; lower prices and slower sale times.

The bottom line for this market is motivation. If you are motivated to sell (and by this we mean ready to price very competitively) the job can get done. If you are looking to buy and sell in this market, the current market may not matter as much as evidenced by our 10% sales theory.

Many factors such as location, updates, and overall condition of the property are really helping to keep some neighborhoods and houses from being on the market for too long. We've had some very recent success in this market, something we attribute to our unique marketing plan and maybe more importantly, our clients willingness to trust our judgement and sincerely listen to our recommendations.

Who Is Buying?

Investors and first time buyers for the most part.


Who Is Selling?

Banks with their REO entry-level homes priced under market to induce a bidding war. Still, homes in all market segments are still selling with the right combination of price and marketing.


Loan Market

Wow! We're seeing loan rates hit the mid to high 4% range these days. FHA loans for first time buyers are also still available, requiring only 3-5% down payment, and following suit with interest rates under 5%. And yes, this is for a 30 year fixed rate. Buyers should expect to be asked for full documentation of income, credit, and proof of funds for down payment.

Even if your not in the market to buy a home, you may want to consider refinancing if you have some equity . If you haven't refinanced your house in the last 4 months, you need to call us for a recommendation to some loan officers who can save you some money with these types of rates.


New Laws and Trends

The Stimulus Package - Already taking affect as it relates to first time buyers. First time buyers will be receiving a tax credit, not just a deduction, for up to $8000 if they purchase a home this year. For more information please see our guide to understanding the stimulus package.

Foreclosure Time Frames Extended in CA - Assembly Bill 7 (ABX27) has extended foreclosure proceedings an extra 90 days from the original 3 months needed from the time a notice of default was filed until the time they could post a trustee sale. The idea is to let many homeowners who are in trouble have time to reinstate the loan or consummate a short sale. We are seeing this law pan out by limiting the amount of bank owned listing coming to market the last two months. We are unsure whether this will continue to slow the flow of REO listings and increase the amount of approved short pay sales, but do know that it will at least give troubled owners a chance to keep their house or avoid foreclosure.



FOUST Team News

We're excited to announce that we just had one of our articles published by not only Realty Times, a great real estate news publication, but also Yahoo Real Estate. If you'd like to check it out just do a quick Google search with keywords "Todd Foust on Yahoo Real Estate" and it should be your first organic result.

Thank you for reading our real estate update, if you found it useful feel free to bookmark it, send it to a friend, save it as a favorite, or subscribe to our blogs RSS feed for automated updates. If you have any questions feel free to contact us at info@FOUSTonline.com.

First-time Buyer's Guide to Understanding the Federal Income Tax Credit

Are you afraid to buy a home now worrying that you might not be able to afford it because of the crash in our economy? No need to worry! The IRS new stimulus plan might help. This policy, effective for purchases on or after January 1, 2009 and before December 1, 2009 has become a hot topic.

Let us make it simple for you...It is a great time to buy a home now! Not only are interest rates lower than 5%, there is also an offer of tax credits. $8,000 is the maximum amount a homeowner can get for credit, no matter how much the purchased home may be. We know that last summer, the refundable credit required a repayment. But the new stimulus plan promises nothing but a refund. There is no repayment by the homebuyer whatsoever. It is just pure heavenly income tax credit.

And who may be qualified for this income tax credit?

• Anyone who purchases a single-family residence, as long as it is the homebuyer's principal residence. This includes condominiums, townhouses, or a co-op.
• First-time homebuyers. Meaning, those who have not owned a home in the 3 years before purchasing an eligible property.
• A homebuyer who utilizes revenue bond financing.
• For a full refund in tax credits, the homebuyer may have a total annual taxable income of no more than $75,000 ($150,000 on a joint return).
• For a reduced tax credit, the homebuyer may have a total adjusted income up to $95,000 ($170,000 on a joint return) or those who qualify as a first-time homebuyer. Also for the first-time homebuyers, if the $8,000 is greater than the tax you owe, then you will get a refund check for the difference.
• A home buyer meeting the basic requirements who purchase before December 1, 2009
  

Obviously, there are many homebuyers who will benefit from these tax advantages when buying real estate in 2009. We advise prospective home buyers to talk with their tax professional first and then see us about finding a home before the deadline. In fact, this new home buying incentive may already be taking effect. According to the California Association of Realtors, buyers took advantage of a 41 percent decline in the median price of an existing home as California home sales doubled in January from a year earlier. We hope this guide will help those considering the purchase of a home in 2009. Please contact us with any further questions.

Home Buying for Veterans – Understanding The VA Loan Program

Many Veterans, including those returning from overseas need assistance in transitioning to civilian lives. Buying a home is often a first step in doing this and VA loans is one way our great nation helps them to do just that. Here are some important facts about VA loans that veterans, both old and young, need to know.

The Veterans Administration (VA) does not make loans. It guarantees loans made by an approved institutional lender, much like the FHA. The main differences between the two government programs are:

1) Only an eligible veteran may obtain a VA loan.
2) The VA does not require a down payment up to a certain loan amount.

Both programs were created to assist people in buying homes when the conventional loan programs do not fit their needs. When a veteran finds a home they wish to purchase, they will need to see a VA approved lender who will make the application and process the loan for them.

Important Facts About VA Loans

- A veteran must possess a Certificate of Eligibility, which is available from the VA, before applying for a VA loan. The certificate will show the veteran’s entitlement, or right to obtain a loan.

- A major benefit of a loan guaranteed by the VA is that no down payment is required on many of the loans. There is a maximum loan amount that is allowed for a zero down type of loan, and a very reasonable formula for calculating the minimum down needed for higher loans.

- If a veteran sells his or her home and the buyer gets a new loan that pays off the VA loan, then the veteran may restore the VA eligibility and apply for a new VA loan.

- A VA appraisal is called a Certificate of Reasonable Value (CRV). A loan may not exceed the value established by the CRV.

- Maximum loan amounts vary by state and by local community values, but there is no upper maximum price that a veteran can pay for a home.

Veteran Must Live In The Home

For VA loans the veteran must live in the home, there are no exceptions to this rule. Other criteria apply for these loans, and points are charged to the seller, which can be a big drawback. Also, there are no prepayment penalties allowed on VA loans and the seller usually has to pay discount points on these loans, unless it is a refinance. Many different types and terms of loans, also known as length of time to pay back the loan, are available for VA buyers.


Special Advantages for VA Loans

Even if you have foreclosure in your past, the VA has special programs to help buy another home but you have to contact them first to see if you qualify. Two of the biggest advantages are that there are no mortgage insurance premiums required and assumable loans are available.

We would like to extend our sincerest gratitude and thank all of our veterans, both young and old, for serving our country. The United States truly is the greatest nation in the world as evidenced in part by programs like VA home loans. Our hope is that this information will educate veterans about all the home buying and loan opportunities available to them. It is our desire that veterans will take advantage of this liberty. If you are a veteran or a family member of a veteran and have any further questions regarding VA loans, please contact us.

Anaheim, CA Real Estate – Buying A Home With FHA Financing.

Anaheim home buyers, especially those with minimum downpayments are finding FHA loans to be very desirable for financing real estate in Anaheim. An FHA loan gives home buyers the option of putting down a very small amount of money, some FHA loans require as little as three percent down payment. Here is some valuable FHA loan information that prospective buyers can use while looking at homes for sale in Anaheim, CA.

FHA History

The popularity of FHA loans in Anaheim, California is on the rise. Although the institution has been around since 1934, it may have never been as popular as it is now. The Department of Housing & Urban Development (HUD) absorbed the Federal Housing Administration (FHA) under its umbrella in 1965. Previously the lack of FHA loan popularity in California was due to rising home prices and very low loan limits set by the agency. Also, the FHA appraisal guidelines were very stringent and caused frustration among both buyers and sellers in Anaheim, CA. Fortunately, both of these issues have been greatly improved.

The FHA insures loans that are made by approved lenders. They do not make loans, but only insure loans made by approved lenders who service or sell the loans on the secondary mortgage market. As long as FHA guidelines are used in funding the loan, the FHA, upon default by the borrower, insures the lender against loss. If the borrower does default, the lender may foreclose and will receive cash up to the established limit of the insurance. The lender is protected, in the case of foreclosure, by charging the borrower a fee for an insurance policy called Mutual Mortgage Insurance (MMI). The premium is paid either as a cash cost at closing or it is added to the mortgage amount. The later being the most common preference.

FHA Mortgage Limits on Real Estate in Anaheim

The FHA periodically changes its mortgage limits and as of January 14, 2009, the maximum mortgage limit in high-cost areas is 115% of the local median price, but not to exceed a maximum of $625,500. In many parts of the country the upper limit is $417,000 for a single family home and can even be lower for some depressed areas. Orange County homes, including those in Anaheim are now at the upper limit of $625,000.

Anaheim Home Buyers with Blemished Credit History

If you are looking at homes for sale in Anaheim and your credit is less than perfect, FHA might just be the loan for you. You may qualify for a FHA loan even if you have had financial problems.

1) FICO scores can be lower than those for a conventional loan.
2) Bankruptcy - You might obtain an FHA loan two to three years from the date of your bankruptcy discharge, as long as you have maintained a good credit since your debts were discharged.
3) Foreclosure - If you keep your credit in excellent shape since a foreclosure, an FHA loan may be available to you two to three years from the final date of your foreclosure.

Competitive Rates and Terms

Today’s rates and terms are very straightforward and very competitive.

1) The lenders have very little adjustments to the FHA loan rates, with the rates usually within .125 % of conventional loans.
2) Mortgage insurance is funded into the loan with just a very small premium added to the monthly payment, usually less than other private mortgage insurance.
3) As of January 1, 2009 buyers can get by with as small as 3.5% down payment. The FHA even allows downpayment money in the form of gifts from others.
4) Allowable debt ratios are higher with FHA than with the limits imposed by conventional loans. This simply means they are not as picky if you already have other debt from student loans, cars, credit cards, etc.

Fewer Required Repairs than the FHA of Yesterday

At one point, FHA repair demands were so excessive that the sellers would discount the selling price if the buyers would agree to obtain conventional loans instead of FHA. Today the requirements are much more reasonable.

1) Defective roofs that leak must still be replaced but an older roof that does not leak does not need to be replaced.
2) Windows that stick when opening or windows with cracks in the glass do not need to be repaired.

Home buyers in Anaheim should be advised that FHA appraisals never take the place of a professional home inspection. Buyers should still obtain a professional home inspection before a purchase is closed. FHA still does require some repairs to be done that a non FHA loan would not ask for. Some may consider these repairs to be “ticky tack” but they are mandatory nonetheless. This can often present a problem when the property in question is being sold “as is” such as often case with bank owned real estate.

After reading this information on FHA loans, Anaheim home buyers should have a better understanding of another type of loan available to them. An FHA loan can be extremely helpful if you are only able to make a minimum down payment and can be a valuable tool for buyers to have at their disposal. There are many important aspects to remember about FHA loans, so be sure to contact a reputable agent or loan officer with further questions about loans or real estate in Anaheim.

4 Places Your L.A and Orange County Twenty Something Wants to Live But Probably Shouldn't

Today’s Millennial Generation is known by mainstream America to be all about one thing...themselves. Many news sources have deemed the millennial "spoiled" and "wanting of everything, right now, without sacrifice."

We'll be the first to recognize that many of the millennial are hard working and an asset to American society. However, instead of chastising an entire generation, we'd like to encourage those who think they already deserve the corner office, sushi lunches, bottle service, and weekly massage therapy to rethink their current value set. We want them to think for the long term, become financially secure enough to afford the lifestyle they want, learn the value of patience and deferred gratification, and learn how their real estate decisions now will impact their plans for the future. Here are some of the top four places Los Angeles and Orange County twenty-somethings want to live in but probably shouldn't.

1.) Newport Beach, Balboa Peninsula

Sorry guys, but living Newport Beach as a twenty-something may be tougher than you think. If you have an average income and any aspiration of financial independence, renting in Newport is about as difficult a place to make that happen as you can get. Besides a premium for rent, there are a lot of other entertainment venues that are also sure to stab a hole in ones's wallet. There's Fashion Island (for the fashionistas!), Balboa Peninsula, and endless lists of different bars and clubs at night.



2.) Santa Monica

Santa Monica, CA is a very big city and has a hip nightlife which can get very pricey. For a twenty-something not making that much money, it might not be such a great idea to have such close access to so much high-end entertaiment. The 3rd street promenade is a very popular destination to spend some serious money on fashion. Set in a beautiful seaside location, Santa Monica has a seemingly endless supply of things to do, the problem is most are not cheap.

3.) Hollywood Hills

Unless you're a star waiting to be discovered......no wait, especially if you're a star waiting to be discovered, the Hollywood area is just too expensive for you. Hollywood is known for entertainment, and the name itself has connotations of glitter and glam, fame and fortune. Hollywood is a great place to visit, and it's a great place to live if you have money, but it's not a great choice for a twenty-something with an unclear career path. Again, there is just too many places to spend money and too few legitimate opportunites.

4.) Downtown Long Beach

The Shoreline Village, The Pike, Pine Street...Just to name a few good places for increasing your credit card debt. Unique shops and fine dining are abundant in these places and it is easy to keep doling out money without even noticing.

Why The Cost Of Living In These Areas Really Adds Up

Parking: Most of these destinations are in and around L.A., as such, most metropolitan Angelinos are already well versed in pay-to-park lifestyle, but those from out of area need to be brought up to speed. You may walk more or learn to multitask better, but most will have to add it up to another cost of living.

Eating Out: It's too early to go clubbing, so let's go shopping and eat out! With the millennial generation, an average shopping spree cost about $50 and an average price of lunch at an upscale restaurant is $20. Plus Tip!

Bar Hopping and Clubbing: Club cover charges range from $10-$30. Drinks usually $10 each. Taxi rides cost about $2.95 for the first quarter mile and has a $30 per hour wait time. Imagine going clubbing at least three times a week, drinking at least two drinks a night, and needing taxi rides every night. That really adds up.

Rent: For the most part, rent ranges from middle of the road to sky high. Now and then, there are some deals to be found on apartments that will be more comparable to other parts of the County. We know there are many who will say they'd rather pay just a little more to live in these pricey zip codes, especially when it knocks down their commute. What people often don't take into account is the temptaion of living in such a potentially expensive area may make it harder to make that rent payment than ever before.

As parents, millennial adults can be difficult to understand and frustrating to manage. Many parents are irritated that their children seem to want, and often demand, a better lifestyle than they have. Rather than be irritated, we'd love to help you educate your loved ones on the power of sound saving and investing, particularly with real estate. We'd like to help you show those closest to you that living in expensive places is not a right, but a reward for hard work, dedication, and some deferment of gratification. Lastly we'd like to help you provide a roadmap for your children, and maybe yourself, as to how this type of lifestyle can be achieved if they are willing to make some sacrifices.

In the end, it's not an easy road to walk but one that will last forever. Investing in the future instead of wasting time, energy, and money on expensive things will help open the millennial's eyes to the reality of what their priorities should be. We want them to see that instead of blowing all their money on "fun" things, they should be looking past the weekend and start planning for their next ten years. They are blessed in that they are coming into a market with low prices, low interest rates, and a seemingly endless supply of inventory but unless they start preparing today, they may just miss the real estate opportunity of a lifetime.

CA Property Tax Appeals – Lowering Your Orange and Los Angeles County Taxes

With declining property values and a slumping economy, many Californians are looking for ways to cut back. For California homeowners who have purchased in the last 5-10 years, one of the easiest ways many people can reduce their spending is to pay less in property taxes. This can be accomplished by ensuring that your property tax assessment is accurate and as low as possible.

If you are not sure of the accuracy of your tax base, consult your local Realtor or real estate appraiser to find out if your assessed value is close to accurate given the current value of your home. Many Californians are finding their current assessments to be completely inaccurate, especially if they bought 2-10 years ago, and will save hundreds, if not thousands, by filing some simple paperwork.

For homeowners with over-assessed property, there are two different ways for you to get it reduced. The first is the Informal Assessment Review, which we could call the easy way because you simply ask the county assessor to review their assessment of valuation for your property by filing a simple form. When this doesn’t work, The Formal Request for Changed Assessment, which is a little more intensive but can still pay dividends, involves filing an appeal with the Assessment Appeals Board where you can choose to have an independently reviewed Hearing regarding your case. In many districts, including Orange County, the Assessor wants property owners to file the informal review before requesting a formal review so owners really need to check with their local Assessor.

Informal Property Tax Appeal or Review - Each county has deadline dates that may vary, but the informal appeal process is desirable because with little effort you may get the assessor’s office to lower your property assessment just by filing a review request. On the other hand, they are the ones who set the value in the first place and it may not be realistic for them to readily admit that they made a mistake especially considering there is no independent overview party reviewing the process and decision. If the assessed value is determined to be in error (lower), then you will be granted a reduced assessment and they will reduce the taxes required. This will result in a tax refund (with interest) that will automatically be sent to you. If you are denied and still feel that the assessed value is overstated then you may need to file the Formal Appeal.

Formal Property Tax Appeal or Review - Formal Requests for Changed Assessment and Appeals are usually due either on September 15th or November 30th. The advantage of the formal review is that you will get an independent review of your assessed value by a Hearing officer. The disadvantage is that it will take more time and involve more effort. It is not necessary to provide comparable values and information at the time of the application, but you might as well get them prepared since you will need them at the Hearing later. Finding the data is more difficult as time proceeds, so it is smart to get the homework done early. Comparable sales (dated no later than March 31st for 2008) are a basic minimum of evidence that is needed at the Hearing. After filing your Formal Request for Changed Assessment it may take 6-9 months before you hear from them regarding an appointment to schedule a Hearing. Once you do hear from them then it may be prudent for you to call the Assessor’s office to see if you might be able to reach an agreement on a lower Assessed value without going to a Hearing. If an agreement can be reached on a lower value, you can enter a Stipulation Agreement which reflects the revised Assessed value for your property for the appeal year.

Appeals Board Hearing - If an agreement is not reached, you either present your case to a Hearing officer (the default method) or you present your case to the Assessment Appeals Board. After a decision is reached you will be notified if a reduction is granted. If so, you will receive a refund usually within 6-8 weeks

Addition information and forms can be found at the California State Board of Equalization Website http://www.boe.ca.gov/proptaxes/pdf/pub30.pdf and forms for informal reviews requests can be found at your county tax assessors website. Residents of Orange and Los Angeles Counties can feel free to contact us to aid in finding comparable properties for their assessment appeal. Filing these simple forms has helped many people save quite a bit of money so if you have reason to believe your assessed value is too high, we’d encourage you to at least check it out.

LA and OC Housing Market Update

The recent statistics are in and home sales in the local areas have some definitive trends. Entry-level homes, currently defined by those at $350,000 and less have been the best selling housing demographic. How much better? Try 70% of the current home sales for last month!

We attribute this statistic to a few things:

• Most of the distress sales fit this price point
• FHA loans have increased in popularity helping buyers with smaller down payments
• Investors looking for best cash-on-cash opportunites are finding this market attractive
• Rents are still very strong for modest single family homes

With interest rates recent decline and many home shoppers finding rates around 4.5-4.7% for convential fixed 30 year financing we expect this to remain the strongest market segment in 2009.

The other hot selling segment has been the luxury property market. Less influenced by stringent financing and a sluggish economy, the ultra affluent are still buying expensive real estate. While market prices have had to become more competitive, luxury home owners are still finding sales chugging along.

The slowest market segments are the mid-range and upper mid-range homes which we are attributing to owners in the lower segment lacking home equity making "move up" sales tough. While sales are tough, they are not impossible, but home owners need to expect to be very aggressive with their pricing.

What to expect next?

• Prices to continue a slow creep downward
• Interest rates to slowly creep upward with inflationary pressures
• Sales to continue to increase in the lowest and highest segments
• More bidding wars for rock bottom priced bank owned property
• More lenders willing to workout short sales

Well, that's our crystal ball, well worth the price of admission!

Have a great month and as always, we're always here to discuss any of your real estate needs regardless of the challenging market.