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167 more days of free money; housing outlook better in 2010?

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167 more days of free money; housing outlook better in 2010?

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POSTED November 15, 2009 2:34 a.m.
Forget the Dow Jones Average or the leading economic indicators monitored by the Federal Reserve.

When it comes to how healthy the economy is in Manteca and the rest of the Northern San Joaquin Valley most people look toward one indicator above all others – housing prices.

The median selling price of an existing home in Manteca that is currently at $176,625 has been bouncing between $174,900 and $179,900 since early April. Before that prices dropped an average of $4,000 a month during the last part of 2007 and the first four months of this year. The average monthly price drop from the start of 2007 to the start of 2008 was $10,000 a month.

“I think we’re pretty much at the bottom now,” noted Tom Wilson of Wilson Group Realty.

That however, as Wilson and others emphasize, doesn’t mean price gains are around the corner any time soon nor does it it mean buying a home is going to get any easier.

“It’s still going to be tough out there for first-time buyers,” noted Carol  Bragan of Bragan Realty.

Bragan, as an example, has just spent 10 months trying to get one first-time buyer into a home. The problem is the crush of investment money with all cash offers that often lures banks away from higher offers from those who have approved loans.

Even so, Bragan and others welcome the extension of the first-time buyers $8,000 tax credit until April 30, 2010 with any property in a binding contract by that date still eligible to get the credit if the deal closes by June 30, 2010.

 Sue Teunissen of Coldwell Banker Real Estate notes that she has had several of her clients that have taken advantage of the tax credit. Bragan agrees that the credit is helping entice first-time buyers to start looking which is something they need to do as soon a possible if they stand a chance of taking advantage of the tax credit.

Bragan noted such a search can easily take four to five months with offers on homes pushing 18 before a first time buyer beats out an investor.

“It truly is free money to the first time buyer,” Wilson said.

Wilson is hopeful the $6,500 tax credit that goes to an existing home buyer who buys a new home will help stimulate new home sales. He noted new home construction is effective at generating jobs while existing home sales are helping stabilize the market.

Perhaps the best news is simply time catching up with the liar loans and the tricky mortgages that were issued in 2005, 2006, and even the early part of 2007.

Bank economists say that for all practical purposes the loans that should never have been made have either worked their way through the foreclosure process or are doing so now. The last big spike is expected to hit the Northern San Joaquin Valley market in early 2010 and then see foreclosures from liar loans and such start dropping off. That doesn’t include loans that go delinquent due to loss of income thanks to unemployment that has reached 13.5 percent in Manteca.

“Hopefully the tax credit extension will give the market a shot in the arm through the first part of the year and then it will pause,” Wilson said.

The pause – if all plays out well – will come just as available foreclosures start to drop off.

Before then, though first-time buyers are up against a slew of investors from out-of-state to people who own their own homes outright and who are taking out a line of credit against their homes to secure investment property.

“Ideally the banks would do something to put first-time home buyers on equal footing with all cash buyers,” Wilson said.

Bragan agrees noting that it is still tough out for first-time buyers hunting for a home.

The federal tax credit also was expanded to include existing homeowners who have lived in their primary residences for five consecutive years out of the last eight years.

First-time home buyers still may be eligible for a tax credit of up to $8,000, while existing homeowners may receive a credit of up to $6,500.  The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers, to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The bill maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.
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