REAL ESTATE OUTLOOK 2010

Predicting the future is tricky. At best it’s two parts knowledge and one part luck. If there’s one prediction everyone wants, it’s what markets will be doing in the future.
Are we there yet?— Home prices won't hit bottom until early 2010. Some say it's really just a question of absorbing the supply of vacant properties. Home prices at the national level are expected to fall another 5 to 10 percent before stabilizing.
Tax credit—Exiting home sales rose again in November as first-time buyers rushed to close sales before the original November 30th deadline for the recently extended and expanded tax credit, according to the National Association of Realtors. NAR Chief Economist, Lawrence Yun, says the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”
Mortgage rates—It is predicted that rates will begin inching up to 5.28 in the first quarter of 2010 and hitting 5.50 percent in the following quarter.
Investor activity— By looking farther ahead than next quarter’s earnings, commercial real estate companies can plan strategically to ensure success. The good news is that relatively stable cap rates and strong capital flows should keep prices up, at least for the next couple of years. Some say that for the first time in a long time, real estate is priced right relative to interest rates.
After a quiet year of investment sales, buyers are preparing to forge ahead with acquisitions in 2010. Two thirds of investors (65%) who responded to the 6th Annual Investment Survey plan to boost their investment in commercial real estate over the next 12 months.
It is clear that investors want to pursue new acquisitions. Overall, 72% of respondents indicate that they are currently amassing capital in preparation for buying opportunities.
Economic recovery—One of the few people who saw the US economic crisis coming, International Institute of Management President Med Yones, is now predicting that the economy will begin to recover in 2010.
The IIM is not a fan of expensive stimulus packages. It instead favors job creation through funding for small businesses, “The most cost effective and quickest method to stimulate the U.S. economy is to support job creation through US small businesses and innovation development. U.S. Census Bureau statistics show that 98 percent of all U.S. firms have less than 100 employees. These 27 million small businesses create over 85 percent of all new jobs and employ over 56 percent of all private sector workers. The main focus of development programs should be innovation development, export and employment support. This solution would be a much less burden on the taxpayers; it can be implemented without too much new legislation, and would have a much faster positive impact on the economy.” Information sources: Politicususa.com, Realtors Commercial Alliance, and Realtor.org

Winter weather advances

The rare occurrence of snow is expected to be visible outside the windows of St. George today, and the National Weather Service warns that significant accumulations are expected.

Since Sunday, Washington and Iron counties have been under a winter storm advisory by the National Weather Service that was to remain in effect until 6 a.m. today for the St. George area and noon for the Cedar City area.

Due to hazardous driving conditions, the Utah Depart­ment of Transportation cautions that unnecessary travel should be avoided until the warning is lifted.

Despite the warnings, those with law enforcement and the school district say things ran smoothly Monday and are expected to run smoothly today.

On the highways, Utah Highway Patrol officers from both the St. George and Cedar City areas said things weren't all that bad Monday, but that doesn't mean they're not prepared for the storm, which is expected to continue into today.

UHP Senior Trooper John Gardner said there were much fewer problems than expected Monday in the St. George area, but the snow expected to be on the ground today could create problems.

"We're bracing for it," he said. "But it will probably be business as usual."

If people have to head out on the highways, Gardner said, it's best to drive a lower speeds.

"In snow the contributing factor to accidents is always speed," he said. "We just need to tell people to slow down."

UHP Sgt. Ryan Bauer, who patrols the highways near Cedar City, said there were a few more accidents in that area Monday, but things were still better than expected.

"Most of the afternoon the roads had just been wet," he said. "We'll deal with whatever we're given. We won't close anything unless the storm dictates it."

Officials from the St. George Police Department said the number of accidents was up slightly Monday, something that could have been attributed to poor weather conditions.

"It's not too large of an increase," said Officer James Schafer. "Usually, when we have snow or rain, they do increase É but it's nothing major."

Marshall Topham, assistant superintendent for secondary education with the Washington County School District, had a similar view of the storm. He said as of Monday evening the school district has no plans to alter bus routes or cancel school.

"Right now this storm doesn't look like a storm that's threatening to us," he said. "If it's just a snowy day where the roads aren't slick then we can negotiate that."

Topham added that school district officials planned to wake up at 4 a.m. today to assess the situation, but it's unlikely school will be affected.

"This one isn't too impressive to me," he said. "I don't think this is going to be a big deal."

BY BRIAN AHERN

THANKSGIVING FUN FACTS

Snoopy has appeared as a giant balloon in the Macy's Thanksgiving Day Parade more times than any other character in history. As the Flying Ace, Snoopy made his sixth appearance in the 2006 parade.
According to the U.S. Census Bureau, Minnesota is the top turkey-producing state in America, with a planned production total of 49 million in 2008. Just six states—Minnesota, North Carolina, Arkansas, Virginia, Missouri and Indiana—will probably produce two-thirds of the estimated 271 million birds that will be raised in the U.S. this year.
According to the Guinness Book of World Records, the largest pumpkin pie ever baked weighed 2,020 pounds and measured just over 12 feet long. It was baked on October 8, 2005 by the New Bremen Giant Pumpkin Growers in Ohio, and included 900 pounds of pumpkin, 62 gallons of evaporated milk, 155 dozen eggs, 300 pounds of sugar, 3.5 pounds of salt, 7 pounds of cinnamon, 2 pounds of pumpkin spice and 250 pounds of crust.

Washington County Housing Report Summary

Home sales are up month to month and year over year. Permits remain steady in the range of 40 to 50 per month. Absorption of existing new homes is almost at a stand still as new home sales are barely outpacing new home permits. Lot sales are off slightly over last year’s volume, and off 80% to 90% from the peak in 2005. Homes instead of PUD/condos make up a greater percentage of dwelling sales than a year ago. West St. George, Washington and Hurricane/La Verkin continue to dominate existing dwelling sales. Homes over $300,000 are taking one and one-half to two times longer to sell than homes under $300,000. Foreclosures are at an all-time high in the range of 150+/- and are expected to remain in the 120 range for the remainder of the year. A higher number of homes with filed Notices of Default are foreclosing. Lending has picked up, even though the dollar volume remains low. Foreclosures will drop slightly but still provide a lot of competition to the existing home and new home market. Low interest rates (around 5%) and the extension and expansion of the federal housing tax credit program to include move-ups should assist dwelling sales through the end of the year and into the early months of next year.

Economics 101 Deficiency Judgement and Debt Cancelation

There are many realtors out there that will list a short sale and are not aware of a possible deficiency judgment against the property owner after the home has been sold.
What is a deficiency judgment?
The difference between the mortgage balance and the discounted amount will be the total that the lender may seek a deficiency judgment against the seller who sold their home "short" of what they owed on their mortgage. If granted, this judgment may affect the homeowners and their credit report just as any other judgment. Likewise, the same judgment can be sought after if the homeowner has let their home go back to the bank and the bank sells it at auction for less than what was owed.
What is a 1099 on a short sale?
A 1099 may be given to homeowners as a result of the benefit they've received from the sale of their home. For example, if the bank is owed $100,000 and agrees to accept $75,000 for a short sale, the homeowners actually made $25,000 (the short sale amount). Therefore, the homeowner can receive a 1099 for that amount. It is recommended that your client speak with a local accountant and/or attorney on how a 1099 on a short sale may affect them. Activerain
Home Foreclosure and Debt Cancellation
The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.
What is a cancellation of debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purpose, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds may be reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
IRS.gov

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:
Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream.
Who Qualifies for the Extended Credit?
First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.
Which Properties Are Eligible?
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.
How is a Buyer's Credit Amount Determined?
Each home buyer’s tax credit is determined by tow additional factors:
1. The price of the home.
2. The buyer's income.
Price

Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
Buyer Income

Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.
If the Buyers Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale. NAR

Tax Credit Extension?

The first time home buyer tax extension is definitely the talk of the real estate and mortgage industry at the present time. With the expiration on the tax credit looming, November 30th, many real estate agents and homebuilders are pushing lawmakers to send the credit before it expires on November 30th. The expiration date of November 30th is on the closing of a home so those first time home buyers starting the process now will not benefit from the tax credit.
Senator Bill Nelson of Florida feels that the tax credit should be able to be extended by the end of the week. He made the statement while with President Barack Obama so this is a very positive sign. Senator Majority Leader Harry Reid and Senate FInance Committee Chairman Max Baucus are hoping to add an extension of unemployment benefits along with the extension of the home buyers tax credit.
Baucus and Reid have proposed the extension of the home buyers tax credit through 2010 in which the full $8000 will be received. The tax credit would then be reduced by $2000 each quarter until expiring at the end of 2010. There is very little question as to whether the first time home buyers tax credit has helped the housing industry. For the last three months we have seen home prices stabilize or move higher which has been greatly aided by the tax credit. It will be interesting to see how the housing market reacts if the tax credit is not extended.
Mortgage News Source—October 30, 2009