Just picture the approximately 180,000 buyers with a contract in process, patiently watching as our legislators in Washington dithered around without making a decision as to whether or not to come to buyers’ rescue by midnight yesterday (June 30th). Well, our esteemed congress members did come through at the very last minute. And it went remarkably fast when they finally did pay attention to the matter. Had they not, an $8000 bucks worth of tax credits would have flown out the window for many. I just cannot understand how anything gets done in Washington anymore; this deadline had been looming for months, and nothing was done until the very last minute.

Stimulated, as they should have been, by the national homebuyer stimulus package, these latest potential homeowners in Palm Springs dutifully signed purchase offers to buy a house well before the April 30 deadline. They were making the purchase then in order to earn the promised $8000 tax credit, only to find out belatedly that, mostly through no fault of their own, the closing date for their purchase transaction was not going to take place by the June 30 deadline.  Thus they were going to lose the $8000 credit. This was still the case up until last night!

 Well, I guess “what ends well at least ends well.” These new homebuyers can now take a collective sigh of relief because they now have until September 30, 2010 to close their deal with the $8000 tax credit. This should be enough time, even for buyers who are purchasing a “short sale” property. For some of the details of what happened last night, please go to Last Minute Vote.

*Good News for Palm Springs Homebuyers – Federal Homebuyer Credit may be Extended

Well, not necessarily, I just came across this article yesterday in the Wall Street Journal regarding the possibility that the Fed will extend this tax credit for new homebuyers.
Because of the volume of many buyers currently in the buying/lending pipeline, many are at risk of missing the contract-closing deadline on July 10, 2010. If that should happen, they would not be able to claim the tax credit.
 
These hapless buyers who met the April 30, 2010 contract deadline to start the buying process and who are now waiting on the ponderous buying/lending process to conclude may be in luck, as there is a move afoot that may extend the deadline until this fall.

If you are one of these buyers, see Tax Credit Deadline for a lot more detail. And good luck!

Well! Okay, the Loonie has recently retreated somewhat due to falling commodity prices, fears of sovereign debt defaults in the Euro-zone, and other factors having little to do with the Loonie’s inherent strength.

So, watch for the Loonie to begin anew its move towards parity, relative to the U.S. dollar. That may take a few months, but as we take the long view of overall financial health of the Canadian financial system vis-a-vis that of the U.S., the Loonie should recover nicely. One important long-term factor will be the ability of the Bank of Canada to raise interest rates before the U.S. Fed can raise them here, at the moment holding back because of continuing high U.S. unemployment.

In any case, some of my Canadian clients, planning to buy real estate in Palm Springs, have recently opened up a U.S. Dollar account in Canada or a U.S. bank account here in the U.S. They are taking these actions now so that the next time the Loonie is at, or near, parity with the U.S. dollar, they will be positioned and ready to take advantage of the translation gains.

A recent MarketWatch column in the Wall Street Journal offers an interesting perspective on Canadians buying in the U.S. real estate market: go to A Great Time to Buy Palm Springs Properties. 

Well, if you are a Canadian sitting on the sidelines waiting to buy a winter home or condo here in sunny Palm Springs, now is a great time to act. Prices on Palm Springs properties, depending on location, are down 30% to 60% from the historical highs reached at the top of the bubble in 2005/2006. At that time, the Loonie was worth somewhere around 80 cents US to the US Dollar.

The strengthening of the Canadian dollar to parity with the US dollar presently gives to Canadian buyers an effective further reduction of 20% on our Palm Springs real estate prices. This is relative to prices that they would have paid in 2005/2006.

So if you are a Canadian, looking south of your border for that place in the sun to escape the winter, now is the time to go for your very own piece of Palm Springs real estate. After all, your winter is only five or six months away.

You’re not getting any younger, so what are you waiting for?

The new guideline states that borrowers may purchase a new property after as little as two (2) years from the time of a short sale or similar non-foreclosure sale process. In short, the new guidelines will allow a borrower to purchase a new home with 20% down after 2 years, or 10% down after four years.

Fannie-Mae evidently is recognizing that many homeowners have been forced to sell their homes due to circumstances out of their control, such as a job loss. As the economy recovers and people go back to work, Fannie-Mae backed home loans will once again be available. 

To review these new guidelines please go to Fannie Mae Backed Home Loans.

This initiative is called the California New Home Credit and First Time Buyer Credit. A brief summary of the new credits is shown below.  To read the entire article about it on the Franchise Tax Board web site, go to CA Home Credits. 

General Information:
 These tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, these tax credits are available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010.  The purchase date is defined as the date escrow closes. Taxpayers may apply for the tax credits if they have entered into a contract before May 1, 2010, as long as escrow closes on or after May 1, 2010. These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence. Taxpayers must apply the total tax credit in equal amounts over three successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are nonrefundable and unused credits cannot be carried over. We will allocate the tax credits on a first-come, first-served basis.  Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

If you are thinking seriously about buying your first home or upgrading to a larger residence, now is a good time to make your move. Average home prices continue to be at levels not seen since 2003/2004, and interest rates are still historically low. However, all indications are that interest rates are going to be trending up soon. So it’s smart to buy now and take advantage of both the low interest rates and the tax credit incentive while they are still available.

One part of the bill builds on provisions in the $787 billion stimulus package enacted last February, renewing the government’s $8000 tax credit for first-time home buyers through the first six months of 2010. The other part addresses the continuing high jobless rate with tax cuts for struggling businesses and provides another 14 weeks of benefits to all those out of work, whose benefits have been exhausted or will be exhausted by the end of the year.

The first-time homebuyer $8000 tax credit which was set to expire at the end of November will now be extended through the first six months of 2010; in order to qualify, buyers must sign a binding contract by the end of April. 2010.

For existing homeowners, this newly expanded program includes a $6500 credit for those who buy a new home after living in their present home for a minimum of five years.

To read more, go to articles in the Washington Post, the Associated Press, and the San Diego Union-Tribune.

We continue to be at, or near, historic low interest rates and have been for a long time. We continue to enjoy these artificially low rates because of various government actions taken to stimulate our economy. Wall Street has not been purchasing these mortgage loans because they want higher yields. So, the government has stepped in to buy them at the current low rates, and this is good. However, direct government intervention into the mortgage markets is expected eventually to end. The only question is – when?

Presently the government is purchasing most or all of the FANNIE MAE and FREDDIE MAC instruments at artificially low prices. Evidently, they have extended their buying of this mortgage paper until March of 2010 or thereabouts. What will happen when they stop buying is anyone’s guess. But one thing is absolutely sure. They will stop buying at some point and then interest rates will go up. Whether rates will go up 20 basis points, 40 basis points, or 1000 basis points is something no one can predict, but it’s something to think about.

At the point when the government stops the intervention, rates will go up, and this will be bad. As a borrower, you could lose big time, and at some level of mortgage interest rates, you might not qualify for your loan anymore, because your interest payments will be too high. So if you are a buyer waiting on the sidelines, looking for that perfect time to buy, you might just be there right now. I can predict with some certainty that there will be a bunch of folks who will be kicking themselves next year for not acting now. You have been warned!

I think we can agree that all across the US, it’s all about employment rebounding. Until more people have jobs and a greater degree of security, the broad market will be down, with average prices continuing to fall. In some areas like Detroit, Cleveland and other Rust Belt cities, it may be a decade or longer for real estate to recover.

Fortunately we are in Palm Springs. We continue to draw a broad constituency of buyers, who move here largely for our wonderful sunny weather and warm temperatures. Still, it’s true that bargain prices can be found here now, with average prices in the Greater Palm Springs area generally at levels not seen since 2003.

So the take home message is that I expect to see average prices continue to be under some downward pressure but not universally across all pricing segments or in all communities. It is clear to me that as this economic downturn continues, more and more home owners will be having to sell at a loss. Many potential home buyers reading this kind of forecast are understandably concerned that they may be buying into a falling market and therefore leaving money on the table. To those buyers, I say – evaluate the specifics of the local market you are considering and, by all means, work with a knowledgeable Realtor well versed in the particulars of that local market. There is little question that prices in some areas of the country will continue to fall, but the question is – will they fall substantially in your area of interest?

We’re having bidding wars. You cannot find a decent home below $200K that doesn’t have multiple bidders after only a few days on the market. In the last four months or so, prices have been bid up, due to requests from the owners for “last and final” bid from their would-be buyers. This phenomenon is driven by the sellers having received multiple offers to purchase. Now, there is always the odd, overpriced, junky house in a horrible location that will just sit on the market, seemingly forever, until its price level descends to the value of the land, but this is the exception. Many of the REO’s now for sale are fine quality homes in decent locations. If an REO stays on the market for more then a few weeks in this market, there is probably something really wrong with it.

Cash Buyers are common. In addition to there being multiple bidders on these houses, another characteristic of this market is that most of the successful buyers are those paying cash. And, guess what? Cash wins every time, especially with the banks which, by the way, are the majority of sellers in this segment of the market. If you are bidding substantially below list price, don’t think that by your paying cash, that factor alone will give you the edge in coming in with the winning bid. Paying cash in this market has become the norm. And with such bargains attracting multiple buyers, the starting bid is usually list price.

Don’t be left out. If real estate investments in this price range are to play a part in your investment portfolio, and you have been waiting for the right time to make your move, that time is now. For more on the subject, please reference the recent MSN Money article, It’s Time to Invest.