Purchase a Home Now and Take Advantage of the New Tax Credit of up to $8,000
A benefit that makes your new home affordable
A tax credit is available for first-time homebuyers under the American Recovery and Reinvestment Act of 2009. If you buy a home between January 1, 2009 and November 30, 2009, you may be eligible to receive a tax credit for 10% of the purchase price of your home—up to $8,000. Program highlights include:
1. Any individual (and if married, their spouse) who has no ownership interest in a home during the last three years is eligible.
2. Full credit for single taxpayers with incomes up to $75,000 ($150,000 on a joint return); partial credit for incomes up to $95,000 ($170,000 joint return).
3. Available for the purchase of a single-family home that will be used as a principal residence. Moreover, if the new home you are purchasing is a mobile home or condo, and it is going to be your principal residence, you still qualify for the home buyer tax credit. Even building a home on a land (as opposed to purchasing a ready-made house) qualifies for the $8000 housing tax credit.
4. Homebuyers can reduce (or even eliminate) their income tax liability for the year of purchase by claiming the credit on their tax return.* (*Certain eligibility criteria must be met. homebuyers should consult their tax advisor for further details)
5. If the home is sold before three years, the first-time home buyer (who is now the seller) must pay the IRS the entire amount of the tax credit at closing.
Wednesday, March 18, 2009
Tuesday, March 17, 2009
Tuesday, March 10, 2009
A CONSUMER GUIDE TO THE FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT
A CONSUMER GUIDE TO THE FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT As Modified in the American Recovery and Reinvestment Act February 2009
FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT: EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit:
The amount of the homebuyer federal income tax credit is the lesser of 10% of the cost of the home bought or $8,000.
Eligible Property:
Any single-family residence (including a condo, co-op, or townhouse) may be an eligible property under the homebuyer income tax credit, provided it will be used as the homebuyer’s principal residence.
Refundable:
This homebuyer income tax credit reduces income tax liability. The $8,000 tax credit is a clean refundable credit, unlike the one that was passed last summer, which required a repayment. If you qualify as a first-time buyer (i.e., haven't been a homeowner in the past 3 years), then you can claim the $8,000 to reduce your tax burden. If the $8,000 is greater than the tax you owe, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April 15, 2010. But if you bought a home before the stimulus expiration on Dec. 1, 2009, then you will get a tax refund check for $6,000 from the IRS.*
Income Limit:
In order to be eligible for the homebuyer income tax credit in full, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return). A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.
First-time Homebuyer Only:
The homebuyer income tax credit is designed for first-time homebuyers, which means the homebuyer (and/or the homebuyer’s spouse) can not have owned a principal residence in the 3 years prior to purchase of the eligible property.
Revenue Bond Financing:
A homebuyer who utilizes revenue bond financing may be eligible for the homebuyer income tax credit.
Repayment:
There is no repayment of the homebuyer income tax credit by the homebuyer.
Recapture:
However, if the eligible property is resold within three years of purchase, the entire amount of homebuyer income tax credit is recaptured on the sale.
Effective Date:
The First-Time Homebuyer Federal Income Tax Credit is effective for purchases on or after January 1, 2009 and before December 1, 2009. This guide reflects a modification from the First-Time Homebuyer Federal Income Tax Credit, which remains in effect for homes purchased by eligible homebuyers between April 9, 2008 and Dec. 31, 2008.
FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT: EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit:
The amount of the homebuyer federal income tax credit is the lesser of 10% of the cost of the home bought or $8,000.
Eligible Property:
Any single-family residence (including a condo, co-op, or townhouse) may be an eligible property under the homebuyer income tax credit, provided it will be used as the homebuyer’s principal residence.
Refundable:
This homebuyer income tax credit reduces income tax liability. The $8,000 tax credit is a clean refundable credit, unlike the one that was passed last summer, which required a repayment. If you qualify as a first-time buyer (i.e., haven't been a homeowner in the past 3 years), then you can claim the $8,000 to reduce your tax burden. If the $8,000 is greater than the tax you owe, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April 15, 2010. But if you bought a home before the stimulus expiration on Dec. 1, 2009, then you will get a tax refund check for $6,000 from the IRS.*
Income Limit:
In order to be eligible for the homebuyer income tax credit in full, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return). A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.
First-time Homebuyer Only:
The homebuyer income tax credit is designed for first-time homebuyers, which means the homebuyer (and/or the homebuyer’s spouse) can not have owned a principal residence in the 3 years prior to purchase of the eligible property.
Revenue Bond Financing:
A homebuyer who utilizes revenue bond financing may be eligible for the homebuyer income tax credit.
Repayment:
There is no repayment of the homebuyer income tax credit by the homebuyer.
Recapture:
However, if the eligible property is resold within three years of purchase, the entire amount of homebuyer income tax credit is recaptured on the sale.
Effective Date:
The First-Time Homebuyer Federal Income Tax Credit is effective for purchases on or after January 1, 2009 and before December 1, 2009. This guide reflects a modification from the First-Time Homebuyer Federal Income Tax Credit, which remains in effect for homes purchased by eligible homebuyers between April 9, 2008 and Dec. 31, 2008.
Monday, March 2, 2009
A Look at 30-Year Fixed Rate Mortgages Since 1971
We’ve all seen the headlines. “Rates on 30-year mortgages drop back below 6%.” “Lower rates help sell houses, but market faces broader ills.” “Mortgage Applications Surge with Large Drop in Rates in Latest MBA Weekly Survey.” But what do changes in rates really do for your personal purchasing power and how low is “low” when it comes to today’s rates? To answer these questions, we turned to the experts.
An historical perspective to give you a better perspective as to how low mortgage rates currently are, we turned to Freddie Mac, a shareholder-owned corporation developed by the United States Congress in 1970. The mission of the organization is to provide homeowners and renters with lower housing costs and better access to home financing. I can provide you with a chart which includes the monthly average commitment rate and points on 30-year fixed rate mortgages since 1971.
A few of the key highlights:
• As of January, 2009, we are averaging a 5.05 percent commitment rate on 30-year fixed rate mortgages
• To put it in perspective, in October 1981, interest rates reached their highest point, averaging 18.45 percent; more than three times today’s current rate
• Though rates eventually came down, they did remain at double digit numbers for most of the 1980s and into 1990 (nearly a decade)
• At today’s rate of around 5.05 percent, rates are the lowest they’ve been in Freddie Mac’s record which dates back to 1971
• Historically speaking, rates have moved relatively slow and consistent through the years though there have been some notable peaks. Among them:
o Since 2000, mortgage rates have remained relatively low with a peak of 8.52 percent in May 2000 to the January 2009 low of 5.05 percent
o But to put it into perspective of how fast things can change, in January 1979, rates were at 10.39 percent. Just over two years later, rates reached their peak of 18.45 percent in October 1981. During this period, rates rose dramatically, and at one point jumped almost two percentage points in just 30 days.
The bottom line is that with interest rates remaining at historic lows, this increases an individual’s purchasing power and makes the mortgage payment more manageable. All of this is leading up to a very strong market for buyers.
An historical perspective to give you a better perspective as to how low mortgage rates currently are, we turned to Freddie Mac, a shareholder-owned corporation developed by the United States Congress in 1970. The mission of the organization is to provide homeowners and renters with lower housing costs and better access to home financing. I can provide you with a chart which includes the monthly average commitment rate and points on 30-year fixed rate mortgages since 1971.
A few of the key highlights:
• As of January, 2009, we are averaging a 5.05 percent commitment rate on 30-year fixed rate mortgages
• To put it in perspective, in October 1981, interest rates reached their highest point, averaging 18.45 percent; more than three times today’s current rate
• Though rates eventually came down, they did remain at double digit numbers for most of the 1980s and into 1990 (nearly a decade)
• At today’s rate of around 5.05 percent, rates are the lowest they’ve been in Freddie Mac’s record which dates back to 1971
• Historically speaking, rates have moved relatively slow and consistent through the years though there have been some notable peaks. Among them:
o Since 2000, mortgage rates have remained relatively low with a peak of 8.52 percent in May 2000 to the January 2009 low of 5.05 percent
o But to put it into perspective of how fast things can change, in January 1979, rates were at 10.39 percent. Just over two years later, rates reached their peak of 18.45 percent in October 1981. During this period, rates rose dramatically, and at one point jumped almost two percentage points in just 30 days.
The bottom line is that with interest rates remaining at historic lows, this increases an individual’s purchasing power and makes the mortgage payment more manageable. All of this is leading up to a very strong market for buyers.
Tuesday, January 6, 2009
Why 2009 May Be Just What the Real Estate Doctor Ordered
So What is the 2009 Real Estate Prognosis?
Much of the 2009 real estate prognosis is dependent on the state of the financial system in general and the real estate finance situation, in particular. The fact is, we really can’t find traction until the financial markets find stability and equilibrium. Also important to
consider is the flow of distressed sales throughout the market and whether or not those sales will increase or decrease in the coming year. Knowing this, many experts are predicting that once
the massive amount of fiscal stimulus currently being created by lawmakers and aggressive action by the Federal Reserve kick in, the economy is expected to improve. More specifically, let’s take a look at what the experts are saying about real estate in ‘09:
• According to the California Association of Realtors’ October 15, 2008 CAR’s California Housing Market Forecast for 2009, “Home prices throughout most areas of California will post declines next year while sales of existing homes will continue the rise in 2009.”
• CAR also notes, “The median home price in California will decline 6 percent to $358,000 in 2009 compared with a projected median of $381,000 this year, according to the forecast. Sales in 2009 are projected to increase 12.5 percent to 445,000 units, compared with 395,600
units (projected) in 2008.”
• CAR also notes, “We expect sales of distressed properties to peak in early 2009—a critical factor in the housing market that directly impacts the timeframe for stabilization in the median price.”
• According to USA Today’s December 23, 2008 article Forecasters share prediction for economy’s outlook in 2009, “The long-depressed housing market is widely expected to hit a bottom in 2009. But the rebound will likely be slow and gradual, given rising unemployment and a sluggish economy.”
• According to the National Association of Realtors, “The U.S. economy has entered a recession and will contract for the next three quarters. The recovery, beginning in the second half of 2009, will be tepid. The unemployment rate will peak at 6.7 percent by mid next year before steadily holding down. Despite these challenging economic times, existing home sales will be rising.”
• According to USA Today’s December 23, 2008 article Forecasters share predictions for economy’s outlook in 2009, “We all just need to hang on,” says Allen Sinai, president of Decision Economics, an economic consulting firm. “By late in the year, the economy will be moving up, and 2010 should be a recovery year.”
The Four Step Prescription for Recovery Possibly the most important ingredient in the 2009
real estate correction is the fact that real estate makes up 20% of the Gross Domestic Product in this country and regardless of which side of the political fence you fall on, our country cannot be fixed without first fixing the housing sector. Real estate should be gaining a great deal of attention over the next several months, particularly by our new administration. With this important information in tow, it is important to point out that we currently have several key
indicators that may position our country for a real estate recovery in 2009:
1. Dropping Interest Rates—According to NAR’s December 17, 2008 article entitled Fed Action
Creates Best Interest Rates in 50 Years, Realtors® Report, “Mortgage rates which had averaged 6.3 percent in the third quarter, have recently fallen into the 4 percent range in some
parts of the country.” The article went on to report, “NAR has estimated that a one percentage point decrease in mortgage rates will increase home sales by more than 500,000 homes.”
2. Improving Affordability—The California Association of Realtors recently released its First Time Home Buyer Housing Affordability Index which showed that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago. This increased affordability has brought on a surge in sales in recent months with DataQuick News most recently reporting
(on December 18, 2008) that a total of 5,754 new and resale houses and condos closed escrow in the Bay Area in November. That was up 12.3 percent from 5,127 sales in November 2007.
3. Government Intervention—As we noted before, with real estate making up 20% of the Gross Domestic Production in this country, it is imperative that the government take action to correct the housing sector. We need to move through the current financial crisis and restore the flow of credit so that qualified buyers are able to take advantage of improved affordability and successfully purchase homes. To respond to this, the government is currently looking at a number of corrector options including tax benefits, home ownership credits, subsidies or interest rate stabilization, to name a few. President-elect Obama and his economic team are in the process of developing an economic recovery plan designed to help Main Street and Wall Street
with an ultimate goal of creating at least 2.5 million jobs while rebuilding our infrastructure, improving our schools, reducing our dependence on oil and saving billions of dollars. According to CNNMoney.com’s December 23, 2008 article Obama Closing in on Stimulus Plan, Vice-
President-elect Joe Biden was quoted saying, “While our short-term goal is to start creating jobs as quickly as possible, we plan to invest in areas…that will produce long-term benefits for the long-term health of our economy.”
4. Slowing of Distressed Properties—The timing of our price recovery may depend on how quickly the government takes steps to mitigate foreclosures. According to CAR, “We expect sales of distressed properties to peak in early 2009—a critical factor in the housing market that directly impacts the timeframe for stabilization in the median price.” NAR also reported in its December 17, 2008 article entitled Fed Action Creates Best Interest Rates in 50 Years, Realtors® Report, “To boost the economy, it is critical to stem the rising tide of foreclosures
and boost home buyer confidence in the housing market,” McMillan said. “Lower interest rates coupled with increased foreclosure mitigation are the key ingredients to stabilizing the housing market and preserving communities and homeownership.” Looking forward to 2009, many experts agree that the financial system will begin to show signs of stabilization in early 2009 and we may begin to see a real estate turnaround by the summer. If you are considering buying, this should serve as a good indicator that now may very well be the time to purchase real estate.
If you are considering selling, possibly more so than ever, you need a qualified Realtor® who can assist you in selling your home. It is usually not enough to simply post your home on the MLS and post a For Sale sign in the yard. You need someone like myself who understands the intricacies, inventory and challenges of your local market and someone who knows how to properly position your home so it stands out among the sea of listings currently available.
If you are considering buying or selling your home in 2009, I have the resources, knowledge and experience to properly represent you in today’s market. Contact me today for the representation you deserve.
Much of the 2009 real estate prognosis is dependent on the state of the financial system in general and the real estate finance situation, in particular. The fact is, we really can’t find traction until the financial markets find stability and equilibrium. Also important to
consider is the flow of distressed sales throughout the market and whether or not those sales will increase or decrease in the coming year. Knowing this, many experts are predicting that once
the massive amount of fiscal stimulus currently being created by lawmakers and aggressive action by the Federal Reserve kick in, the economy is expected to improve. More specifically, let’s take a look at what the experts are saying about real estate in ‘09:
• According to the California Association of Realtors’ October 15, 2008 CAR’s California Housing Market Forecast for 2009, “Home prices throughout most areas of California will post declines next year while sales of existing homes will continue the rise in 2009.”
• CAR also notes, “The median home price in California will decline 6 percent to $358,000 in 2009 compared with a projected median of $381,000 this year, according to the forecast. Sales in 2009 are projected to increase 12.5 percent to 445,000 units, compared with 395,600
units (projected) in 2008.”
• CAR also notes, “We expect sales of distressed properties to peak in early 2009—a critical factor in the housing market that directly impacts the timeframe for stabilization in the median price.”
• According to USA Today’s December 23, 2008 article Forecasters share prediction for economy’s outlook in 2009, “The long-depressed housing market is widely expected to hit a bottom in 2009. But the rebound will likely be slow and gradual, given rising unemployment and a sluggish economy.”
• According to the National Association of Realtors, “The U.S. economy has entered a recession and will contract for the next three quarters. The recovery, beginning in the second half of 2009, will be tepid. The unemployment rate will peak at 6.7 percent by mid next year before steadily holding down. Despite these challenging economic times, existing home sales will be rising.”
• According to USA Today’s December 23, 2008 article Forecasters share predictions for economy’s outlook in 2009, “We all just need to hang on,” says Allen Sinai, president of Decision Economics, an economic consulting firm. “By late in the year, the economy will be moving up, and 2010 should be a recovery year.”
The Four Step Prescription for Recovery Possibly the most important ingredient in the 2009
real estate correction is the fact that real estate makes up 20% of the Gross Domestic Product in this country and regardless of which side of the political fence you fall on, our country cannot be fixed without first fixing the housing sector. Real estate should be gaining a great deal of attention over the next several months, particularly by our new administration. With this important information in tow, it is important to point out that we currently have several key
indicators that may position our country for a real estate recovery in 2009:
1. Dropping Interest Rates—According to NAR’s December 17, 2008 article entitled Fed Action
Creates Best Interest Rates in 50 Years, Realtors® Report, “Mortgage rates which had averaged 6.3 percent in the third quarter, have recently fallen into the 4 percent range in some
parts of the country.” The article went on to report, “NAR has estimated that a one percentage point decrease in mortgage rates will increase home sales by more than 500,000 homes.”
2. Improving Affordability—The California Association of Realtors recently released its First Time Home Buyer Housing Affordability Index which showed that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago. This increased affordability has brought on a surge in sales in recent months with DataQuick News most recently reporting
(on December 18, 2008) that a total of 5,754 new and resale houses and condos closed escrow in the Bay Area in November. That was up 12.3 percent from 5,127 sales in November 2007.
3. Government Intervention—As we noted before, with real estate making up 20% of the Gross Domestic Production in this country, it is imperative that the government take action to correct the housing sector. We need to move through the current financial crisis and restore the flow of credit so that qualified buyers are able to take advantage of improved affordability and successfully purchase homes. To respond to this, the government is currently looking at a number of corrector options including tax benefits, home ownership credits, subsidies or interest rate stabilization, to name a few. President-elect Obama and his economic team are in the process of developing an economic recovery plan designed to help Main Street and Wall Street
with an ultimate goal of creating at least 2.5 million jobs while rebuilding our infrastructure, improving our schools, reducing our dependence on oil and saving billions of dollars. According to CNNMoney.com’s December 23, 2008 article Obama Closing in on Stimulus Plan, Vice-
President-elect Joe Biden was quoted saying, “While our short-term goal is to start creating jobs as quickly as possible, we plan to invest in areas…that will produce long-term benefits for the long-term health of our economy.”
4. Slowing of Distressed Properties—The timing of our price recovery may depend on how quickly the government takes steps to mitigate foreclosures. According to CAR, “We expect sales of distressed properties to peak in early 2009—a critical factor in the housing market that directly impacts the timeframe for stabilization in the median price.” NAR also reported in its December 17, 2008 article entitled Fed Action Creates Best Interest Rates in 50 Years, Realtors® Report, “To boost the economy, it is critical to stem the rising tide of foreclosures
and boost home buyer confidence in the housing market,” McMillan said. “Lower interest rates coupled with increased foreclosure mitigation are the key ingredients to stabilizing the housing market and preserving communities and homeownership.” Looking forward to 2009, many experts agree that the financial system will begin to show signs of stabilization in early 2009 and we may begin to see a real estate turnaround by the summer. If you are considering buying, this should serve as a good indicator that now may very well be the time to purchase real estate.
If you are considering selling, possibly more so than ever, you need a qualified Realtor® who can assist you in selling your home. It is usually not enough to simply post your home on the MLS and post a For Sale sign in the yard. You need someone like myself who understands the intricacies, inventory and challenges of your local market and someone who knows how to properly position your home so it stands out among the sea of listings currently available.
If you are considering buying or selling your home in 2009, I have the resources, knowledge and experience to properly represent you in today’s market. Contact me today for the representation you deserve.
Tuesday, December 9, 2008
2009 Real Estate Outlook
Well, no one can say 2008 was boring. The past year was nothing short of a wild and wooly, heart-pounding roller coaster ride—whether you’re talking about the stock market, the credit market or the housing market.
This year will go down in the books as one of the more tumultuous the nation has seen in the financial markets and that had a very real impact on the housing market across the nation and right here at home.
Residential real estate was already slowing early in the year when we were hit by the crisis in worldwide credit markets and the resulting turmoil in the stock market. The problems on Wall Street left all of us on Main Street—including potential home buyers—feeling a lot less wealthy and a whole lot more vulnerable. In addition, it was harder for even well-qualified buyers to get mortgage loans.
What was the result of all this? As of October (the most current figures available at time of writing) the median price for Bay Area homes was down 38 percent from the previous year,according to DataQuick, the La Jolla-based information services company. San Francisco and San Mateo County’s median price held up much better, dipping 12 percent and 21.9 percent,respectively. The hardest hit areas were the more affordable inland communities of Contra Costa County, which endured a46 percent drop in median sales price from the previous year, “A total of 7,613 new and resale houses and condos closed escrow in the nine-county Bay Area in October. That was up4.7 percent from 7,271 in September, and up 38.8 percent from5,486 in October 2007, according to San Diego-based MDADataQuick.”
It’s important to understand that the drop in median price doesn’t mean that your home has necessarily declined by that much. It simply reflects that the mix of homes that sold last year had changed as a result of foreclosures and distressed property sales, and lots of people bargain hunting in the lower end of the market.
More than ever, our market was a story of “micro climates” with dramatically different housing markets depending on where you live. Some parts of the North Bay, East Bay and southern Santa Clara County have been hit particularly hard by surplus inventory and foreclosures. But housing markets in San Francisco and the Peninsula, in general, have remained fairly stable. In fact, even as markets around us struggled, well-priced homes in desirable neighborhoods in our local market still attracted strong buyer interest and sometimes even multiple offers.
As the year came to a close, we began to see an increase in sales throughout the Bay Area—but especially in those regions that had been hardest hit by foreclosures. That’s encouraging news for the market overall. This is all part of a bottoming process; we need to work through this excess inventory in the lower price levels before the entire housing market can fully recover.
So, where does all of this leave us as we prepare for 2009? No one can say for sure, but undoubtedly there will continue to be economic challenges—at least in the first half of the year. The California Association of Realtors is forecasting a 6 percent drop in the state’s median price for single-family homes, but a continued rise in the number of home sales with buyers taking advantage of lower prices.
A lot will depend on whether the financial crisis on Wall Street can be solved, whether the tight credit markets can be unclogged,whether the nation officially slips into a recession and, if so, how deep of a downturn it may be. A lot of questions indeed.
But I remain fairly optimistic. The housing market goes through cycles, and the downturns rarely last very long. We’ve already gone through nearly two years of this cycle. Interest rates remain near historic lows, and homes prices are as attractive as they have been in years. We are rapidly working through the excess inventory of homes in many markets, and the number of sale sis starting to rise once again.
The housing market historically has fared well, especially in the Bay Area. Since CAR began keeping records on Bay Area home sales in 1982, the median price has only dropped six times. And the average annual rate of appreciation has been 8 percent,thanks to our local economy, outstanding quality of life, world class universities and well-heeled residents.
To me, this all adds up to strong reason for optimism as we approach 2009. Here’s to a great New Year!
This year will go down in the books as one of the more tumultuous the nation has seen in the financial markets and that had a very real impact on the housing market across the nation and right here at home.
Residential real estate was already slowing early in the year when we were hit by the crisis in worldwide credit markets and the resulting turmoil in the stock market. The problems on Wall Street left all of us on Main Street—including potential home buyers—feeling a lot less wealthy and a whole lot more vulnerable. In addition, it was harder for even well-qualified buyers to get mortgage loans.
What was the result of all this? As of October (the most current figures available at time of writing) the median price for Bay Area homes was down 38 percent from the previous year,according to DataQuick, the La Jolla-based information services company. San Francisco and San Mateo County’s median price held up much better, dipping 12 percent and 21.9 percent,respectively. The hardest hit areas were the more affordable inland communities of Contra Costa County, which endured a46 percent drop in median sales price from the previous year, “A total of 7,613 new and resale houses and condos closed escrow in the nine-county Bay Area in October. That was up4.7 percent from 7,271 in September, and up 38.8 percent from5,486 in October 2007, according to San Diego-based MDADataQuick.”
It’s important to understand that the drop in median price doesn’t mean that your home has necessarily declined by that much. It simply reflects that the mix of homes that sold last year had changed as a result of foreclosures and distressed property sales, and lots of people bargain hunting in the lower end of the market.
More than ever, our market was a story of “micro climates” with dramatically different housing markets depending on where you live. Some parts of the North Bay, East Bay and southern Santa Clara County have been hit particularly hard by surplus inventory and foreclosures. But housing markets in San Francisco and the Peninsula, in general, have remained fairly stable. In fact, even as markets around us struggled, well-priced homes in desirable neighborhoods in our local market still attracted strong buyer interest and sometimes even multiple offers.
As the year came to a close, we began to see an increase in sales throughout the Bay Area—but especially in those regions that had been hardest hit by foreclosures. That’s encouraging news for the market overall. This is all part of a bottoming process; we need to work through this excess inventory in the lower price levels before the entire housing market can fully recover.
So, where does all of this leave us as we prepare for 2009? No one can say for sure, but undoubtedly there will continue to be economic challenges—at least in the first half of the year. The California Association of Realtors is forecasting a 6 percent drop in the state’s median price for single-family homes, but a continued rise in the number of home sales with buyers taking advantage of lower prices.
A lot will depend on whether the financial crisis on Wall Street can be solved, whether the tight credit markets can be unclogged,whether the nation officially slips into a recession and, if so, how deep of a downturn it may be. A lot of questions indeed.
But I remain fairly optimistic. The housing market goes through cycles, and the downturns rarely last very long. We’ve already gone through nearly two years of this cycle. Interest rates remain near historic lows, and homes prices are as attractive as they have been in years. We are rapidly working through the excess inventory of homes in many markets, and the number of sale sis starting to rise once again.
The housing market historically has fared well, especially in the Bay Area. Since CAR began keeping records on Bay Area home sales in 1982, the median price has only dropped six times. And the average annual rate of appreciation has been 8 percent,thanks to our local economy, outstanding quality of life, world class universities and well-heeled residents.
To me, this all adds up to strong reason for optimism as we approach 2009. Here’s to a great New Year!
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