According to DS News reporting on the report issued by Barclays Capital last week, home prices are expected to drop another 6 - 7 percent over the coming winter months. Following the probable “triple-dip” in the first quarter of next year, Barclays says home prices will “rise very gradually.”
In Southern California, we have returned to an equilibrium between the after tax cost of home ownership and the cost of renting. However, with over 4 million homes nationwide either in foreclosure or seriously delinquent, plus millions more simply upsidedown, additional price declines seem unavoidable as discounted REO and short sale inventory will continue to overwhelm the real estate market for at least another 18 - 24 months. As a seller on the fence, the time to sell is now.
As a buyer on the fence, the time to buy is within the next few years. Current interest rates in the low 4s combined with exceptional values, make the dream of homeownership a reality and currently financially sound decision compared with renting. As always, it's important to purchase a home well within your range of affordability. Just because the bank says you qualify for a certain loan amount, does not mean it fits your personal budget and risk tolerance.
Nancy Moeller, CPA, Real Estate Broker
Seven Gables Real Estate
License #01727426
www.TheMoellerTeam.com
Direct: 714 276-7006
Fax: 714 917-2293
Times are stressful. Many homeowners who refinanced their properties a few years back to pay off credit card debt, medical expenses or place a down payment on another home are faced with overwhelming worry and financial stress today. We've seen people tap into their 401K, run up their credit cards and borrow money from family just to pay their mortgage. Even folks fortunate enough to save a few hundred dollars a month after a successful loan modification, find themselves over $100,000 underwater and struggling to make their mortgage payment. We met with a young couple last week, paying nearly $5,000 for a home that would lease for $2,250.
After a job loss or too much financial pressure, homeowners start missing payments - usually while attempting another loan modification. The goal is to save their home, their dream and their credit. At this stage or sooner, it's critically important for homeowners to look at all of their options. Usually the failure to execute a plan leads to foreclosure. And when it comes to second mortgages, foreclosure may lead to a deficiency judgment. A deficiency judgment is the worst of both worlds - people losing their house and still have the weight of their negative equity chasing them down for wage garnishments and 10 years of harrassing calls.
When facing foreclosure, considering selling instead. When selling your home, a professional agent negotiator can work with the lender to waive any of their rights to a deficiency judgment. They can help you sell your home at no cost. They can help you find a comparable property to rent at typically half the cost. In as few as two years, they can help you buy another home - sometimes at half the price of your current mortgage. We call this re-creating the dream. It's a practical, proven alternative to saving a dream and waiting approximately 15 years to be back in a "break even" position after paying 15 years of double payments just to catch up.
The counseling team with Re-Create The Dream consists of a bank negotiator and CPA available by appointment to review all possible options and help homeowners execute a strategy that leads them closer to their long term equity and investment goals. The one-hour consultation is free of charge. For homeowners who are candidates for a loan modification, the bank negotiator will also handle the modification free of charge.
To schedule your appointment, contact Nancy Moeller at 714 276-7006.
The trouble with most loan modification companies is not their fees. In fact, since October 11, 2010 it has been illegal for any company or attorney to charge up-front fees for loan modifications. As such, fees are only charged when a result is achieved.
The problem with most modification companies is that they do not ask the more important question ... Is a loan modification RIGHT for this person or family? Can the homeowners afford the new, modified payment? How long will it take for the homeowners to recoup their lost equity? Does it make sense to hold on this an asset that is underwater and may cost twice as much as comparable rents? Sometimes, the simplest question is - Would I pay $500,000 for this house today, knowing it's only worth $325,000 even if the interest rate was better?
The answer to these questions may lead the homeowner back to a successful loan modification. Of every 10 people with consult with, we find the following:
When facing any real estate decision, you need a team of professionals. When facing negative equity, you need the advice of an experienced bank negotiator, real estate broker and CPA. For legal questions, you should consult a real estate and/or bankruptcy attorney.
Nancy Moeller, CPA, Real Estate Broker
License #01727426
www.RecreateTheDream.com
www.TheOCExperts.com
Direct: 714 276-7006
The counseling team with Re-Create The Dream consists of a bank negotiator, real estate broker and CPA available by appointment to review all possible work out options and help homeowners execute a strategy that leads them back to their dream of homeownership with equity. The one-hour consultation is free of charge. For homeowners who are candidates for a loan modification, the bank negotiator will also handle the modification free of charge.
To schedule your appointment, contact Nancy Moeller at 714 276-7006.
Okay, let's face it ... with the treat of the shadow inventory of homes hitting the market and experts stating that we may have a few more years of value declines, why is NOW a good time to buy real estate?
The biggest reason to buy now is the uncertainty of interest rates. Right now they are low. Experts expect them to go up in a few years. If interest rates go up just 2%, that's the equivalent of a 20% change in purchasing power. In other words, if you can afford a $500,000 mortgage today at 4.5%, you will only be able to afford a $400,000 mortgage at 6.5%.
$500,000 Mortgage @ 4.5% = $2,533.
$400,000 Mortgage @ 6.5% = $2,528.
And if that's not enough, here are six other good reasons to buy now:
1. You can get a very, very good deal.
2. There is a good supply of inventory to choose from.
3. You will save on your income taxes.
4. It provides protection from inflation.
5. You will have forced monthly savings in the form of principal pay down.
6. After this crisis, real estate will appreciate again.
It's time to start shopping ...
In this market, many equity sellers do not want to compete against the banks and short sale sellers who price their properties aggressively under market to secure a fast sale. Instead of selling their home to buy a home one, they decide to rent out their current home.
Let's say a married couple purchased their home in 1995 for $300,000. Today's it's worth $500,000. Should they meet the tests, they may be eligible to exclude the entire $200,000 gain from their income. One requirement is that the house must be their primary residence for 2 of the last 5 years. By converting a primary residence into investment property for three years, this test is not met and the entire gain at the time of a subsequent sale will be subject to capital gains tax. Ouch!
The complete rules can be found at http://www.irs.gov/publications/p523/ar02.html
Further to this issue is the expectation that prices may continue to decline for the next three years as we work through the shadow inventory of distressed properties. In other words, homeowners thinking they can rent their home for a few years, will likely be in a worse position and forced to either sell for less than today's value or move back into their previous home.
As such, homeowners sitting on a capital gain on their primary residence should consider the strategy of selling their main residence, excluding their gain, buying a new house at historically low interest rates and buying a different investment property for long term growth.
The counseling team with Re-Create The Dream consists of a bank negotiator and CPA available by appointment to review all possible options and help homeowners execute a strategy that leads them closer to their long term equity and investment goals. The one-hour consultation is free of charge. For homeowners who are candidates for a loan modification, the bank negotiator will also handle the modification free of charge.
To schedule your appointment, contact Nancy Moeller at 714 276-7006.
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As a CPA, REALTOR® and financial expert, I focus on protecting our clients financial interests in the sale.
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