Triangle Housing Market Turns Corner, with October Sales up 17.6%
Triangle Business Journal-by Amanda Jones Hoyle
For the first time in more than a year, the Triangle residential market made a monthly gain in the number of homes sold, with 17.6 percent more homes sold during October compared to the year prior,
Market watchers say the data signifies a major turning point in the local housing economy.
In the Triangle, 2,009 homes were sold in October compared to 1,709 homes sold the same month the year prior, according to Triangle Multiple Listing Service. Triangle MLS tracks new and existing home sales data in Wake, Durham, Orange and Johnston counties.
The dollar volume of homes sold last month also grew, by 8.3 percent, to $441.8 million in October compared to $407.9 million in homes sold the year prior. That's the first gain in sales volume since October 2008, says residential real estate analyst Stacey Anfindsen.
"We've hit the floor, and at least we know how low we can go - hopefully -- and operate our business off of that," Anfindsen says.
Anfindsen gave two reasons the market improved. First, the federal $8,000 first-time home buyer tax credit program, which expires at the end of November, helped convince many buyers who were on the fence to take the plunge. The federal government since has instituted another tax credit program that offers a $6,500 tax break to qualified homeowners looking to move up to middle-market homes that cost no more than $800,000.
Second, home sales in the Triangle started their free-fall in late 2008, so the market today is in comparison to one of the slowest housing markets in decades.
"October, November and December should be really good because everything kind of shut down this time last year," Anfindsen says. "We'll probably see the market grow 5 to 10 percent and have nice comparisons until about February when we will see it start to normalize."
All is not well, though. The average Triangle home sale price was down by 8 percent in October compared to October 2008, and it took four more days on market to sell than the year prior. But the inventory of homes for sale also declined, by 13 percent, and the number of new listings declined by 2.5 percent, meaning there is less competition for the homes on the market for sale.
In Wake County, 1,141 homes sold in October compared to 967 home sales the year before, which is an 18 percent increase. Total dollar volume of homes sold in the county was $270 million, which was up by 5.5 percent from the year prior.
In Durham County, 269 homes sold in October compared to 210 homes sold the year before, which is a 28 percent increase. Total dollar volume of homes sold in the county was $52 million, which was up by 23.4 percent from the year prior.
In Orange County, 91 homes sold in October compared to 62 homes sold the year before, or a 47 percent increase. The total dollar volume of homes sold in the county was $28.3 million, which was up 43 percent from the year prior.
In Johnston County, 193 homes sold in October compared to 176 homes the year before, or a 9.7 percent increase. Total dollar volume of homes sold in the county was $32 million, which was up by 5 percent from the year prior.
Expanded Version of Tax Credit Will Allow More Homebuyers to Qualify
RISMEDIA, November 9, 2009-President Obama recently signed an expanded version of the $8,000 first-time homebuyer tax credit that was set to expire on November 30. "The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules," said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. "Although the tax credit remains at $8,000 for homebuyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for homebuyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up homebuyers did not qualify." Consider these three examples:
Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.
Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.
Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.
The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. "If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010," Nicholas said. "It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit."
The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. "This means that more people will qualify for the credit - especially in parts of the country with higher costs of living," Nicholas said. "This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit."
There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:
-The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence - you could live in one unit and rent out the others
-If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit).
-The credit applies even if you have co-signers on your mortgage loan
For more information, visit www.CMPSInstitute.org.
It Is All In The Numbers
by Cliff Hockley
"The biggest mistake many investors make is to ignore the numbers generated by their properties."
Financial statements. Let's start with financial statements, or lack of them. Many real estate investors only track the results of their real estate investments at tax time. Instead investors should be reviewing their results by reading their financials on a monthly basis, or at a minimum on a quarterly basis. I have been working with a client who always files an extension. He really never pays attention to his financial information, because it is always six months late. He just assumes he is making money and the people that are working for him are doing the right thing. He owns over 150 units at three locations. He has no way to make a quick decision. He has no idea if he is losing money or making money. Do you want to be in his shoes?
What are Financial Statements?
Typically, we assume financial statements will include:
1. A balance sheet (a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year). This document is usually prepared by a CPA or management accountant.
2. An income statement (a summary of income and expenses) usually prepared by the investor, a bookkeeper, an investor, or a property manager.
3. An income register that includes a rent roll (summary of all collected rents and miscellaneous income).
4. Check register (list of all bills paid by check or via wire or electronic transfer)
5. A summary of security deposits (a summary of all tenant security deposits)
6. Aged payables reports (if you have aged payables, bills that have been incurred but not paid.) Typically financial statements are prepared on either an accrual basis or cash basis. In my mind (not being an accountant) I prefer cash basis. It is easier to see how a property is operating from month to month, without the numbers being clouded by budget accruals (O.K., O.K. I know I am not an accountant).
Other helpful thoughts Many people use excel spreadsheets, or QuickBooks to track property income and expenses, or if they own only a rental house, maybe just a checkbook. I recommend that you do not mix your personal expenses with your investment expenses, and that you have a separate check book for every property you own.
What do you look for? I believe you are looking for breaks in the patterns. Accounting is just a way of organizing numbers into helpful patterns.
Look to make sure all the rents have been paid.
Make sure all bills have been paid on time.
Compare the bills and rents to the trailing 12 months.
Are some of the bills out of line? In other words are the water bills higher than you expected?
Is the insurance bill 3 times what you thought it was going to be, especially when compared to your other investments?
Look carefully at your maintenance numbers, are they in line with industry standards?
Cash on cash return
Compare your income and expenses to budget and use the variances to find inconsistencies.
How much you owe to the bank and when you have to refinance or pay off your loan?
Randomly check the check register and income register to see if someone is not siphoning money out of your property accounts. It is very easy for onsite mangers to collect rents and not send them to the central office. (This is why we have a policy that most of our rents are mailed or directly delivered to our office).
Conclusion
Many real estate investments stumble from time to time. Tracking the monthly operations is just like a Doctor checking your pulse, blood pressure and taking your temperature. You can tell a lot from the basics. You can tell early when you are running into a problem and what you need to do to restructure and improve your operational results. Reviewing and understanding your numbers will help you decide whether to keep, sell, refinance, or improve your property.
There are many standard rules of thumb. Call a local property manager and ask how they gauge the successes of your property type.
Finally, ignoring your numbers will not help you. Preparing an annual budget and reviewing your financial reports on a monthly basis are the first and second steps to insuring the operational success of your investment. Do both today. Your real estate investment success is all in the numbers.
Published: October 22, 2009
Home buyers should pay attention to IRS Form 4506-T
Not just a harmless part of the paper blizzard, it potentially exposes otherwise confidential personal financial information to unknown and uncontrollable numbers of people.
By Kenneth R. Harney
October 11, 2009
Reporting from Washington - You might assume it's just another boring-looking piece of the paper blitz you're hit with when you apply for a home loan. But given IRS Form 4506-T's new prominence in the fraud-shocked mortgage market, it's much more than just another document to sign.
The form authorizes a loan officer or mortgage investor to get electronic transcripts from the Internal Revenue Service covering multiple years of your federal income tax filings. The IRS has supplied private tax return information to lenders for years, but the data typically were requested only at the close of escrow, and mainly for self-employed applicants or those with unusual income patterns.
But Fannie Mae recently directed lenders to obtain two sets of electronic transcripts for all borrowers, regardless of income sources -- a 4506-T upfront at application and another at closing. Fannie told lenders the move was part of its efforts to spot fraudulent income claims and limit loan losses.
During the height of the housing boom, many lenders went soft on borrowers, allowing millions of them to "state" their incomes rather than supply copies of tax returns filed with the IRS. These so-called no-documentation loans often later turned out to be "liar loans," with puffed-up incomes enabling borrowers to obtain larger mortgages than they could justify -- or afford -- based on their actual incomes.
When lenders didn't verify stated income claims, liar loans frequently turned into foreclosure bombs. Their remains are visible in neighborhoods across the country, where foreclosures have soared to record levels.
Now, not only Fannie Mae but also most major lenders are tightening standards and double checking everything. When it comes to what you say is your annual income, they want to verify it twice -- even if you submitted stacks of IRS returns.
The IRS is helping out as well by lowering the cost of those multiple verifications. As a result of higher-than-expected revenues generated by skyrocketing demands for 4506-Ts, the IRS -- which is not permitted to make a profit on services such as income verification checks -- has cut the price of transcripts from $4.50 to $2.25, according to industry sources.
"The timing of the cost reduction couldn't be better for lenders looking to return to more prudent underwriting," said Curtis Knuth, vice president of New Jersey-based NCS Inc., one of the largest vendors of Form 4506-Ts to the mortgage industry. Most lenders, he said, do not charge loan applicants separately for income verifications but roll the costs into their origination or processing fees.
The much more intensive use of Form 4506-T also is focusing new light on what consumers should -- and shouldn't -- do when confronted with a lender's or settlement agent's request that they fill one out.
Here's a quick overview:
* Take Form 4506-T seriously. It's a powerful tool, and potentially exposes otherwise confidential personal financial information to unknown and uncontrollable numbers of people. It is not just another part of the paper blizzard.
* Pay careful attention to the IRS' instructions on the form, particularly as related to the tax return transcript years being requested, and to the dating of the form next to your signature. The date you write in is important because the IRS won't provide transcripts unless it receives the request within 60 days of the signing date by the taxpayers making the loan application. Make sure you date the form when you sign it.
Filling in the tax return years is crucial as well because it allows you to limit what the lender, settlement official or secondary market purchaser of the mortgage can obtain. The form includes boxes allowing up to four years of tax data to be accessed, but loan applicants can specify that fewer years be available.
Earlier this decade, controversy erupted in the mortgage industry because some large secondary market loan investors and banks were requiring brokers or closing agents to instruct applicants to sign Form 4506-Ts but not date them or fill in the transcript years being requested. Some lenders even distributed their own printed instructions along with the Form 4506-T, requiring the home buyer's or refinancer's signature, but no dates. This not only countermanded the IRS' instructions but gave investors the ability to check incomes whenever they chose -- long after the closing.
Bottom line here: Be aware of the new importance of Form 4506-T, and get used to seeing it twice during the mortgage cycle. Make sure you know how it's supposed to be used -- and how it can be abused. Check it out in advance by going to the forms area at the IRS website www.irs.gov and downloading a copy.
kenharney@earthlink.net
Distributed by the Washington Post Writers Group.
With over 30 years of experience and hundreds of sales, we can help guide both buyers and sellers smoothly through most any residential real estate transaction.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved
