WASHINGTON -- Thousands of first-time homebuyers will be able to get short-term loans so they can quickly make use of a new $8,000 tax credit to pay for some of the costs of buying a home.

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HUD: Tax Credit Can Be Used on Closing Costs

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can't be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.

In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.

The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

Learn more about the credit, including how to apply for it this year even if you've already filed your taxes, at REALTOR.org.

NEW YORK (CNNMoney.com) -- The residential real estate market picked up slightly in April, as increasingly affordable home prices drew in hesitant buyers.

The National Association of Realtors reported that existing home sales ticked up 2.9% last month to a seasonally adjusted annual rate of 4.68 million units compared to the revised rate of 4.55 million in March.

The sales came in slightly ahead of expert forecasts of 4.66 million annual units, according to a consensus estimate of analysts compiled by Briefing.com, but are still off 3.5% from the 4.85 sold 12 months ago.

First-time homebuyers continued to drive sales, according to Lawrence Yun, NAR's chief economist, but there was also a seasonal rise of repeat buyers.

"Most of the sales are taking place in lower price ranges and activity is beginning to pickup in the mid-price ranges, but high-end home sales remain sluggish," he said.

The median price of homes sold in April was just $170,200, a 15.4% year-over-year drop.

The slight sales increase failed to make a dent in the supply of homes on the market: Inventory rose to a 10.2 months supply from a 9.6 month in March. Much of that inventory jump was due to sellers putting more homes on the market for the spring selling season.

"There cannot be any true talk of a housing correction until we see unsold inventories in the 5-month range," said Bob Walters, the chief economist for Quicken Loans.

Did you know that, for no additional cost, you can be represented by a real estate broker in conjunction with purchasing a home from a builder? Homebuilders are accustomed to working with real estate brokers and often their commission is already covered in their marketing and promotion costs. A broker can provide objectivity and guidance in designing your home and help you select amenities that will lead to a more advantageous resale. He or she can help coordinate the sale of your present home and the closing of the new one. Many brokers offer guaranteed home sale programs so that when your new home is finished, the real estate company will buy your previous home at a pre-agreed price to prevent you from owning two homes at one time; and can usually arrange the occupancy agreeable to all parties. Take advantage of using your real estate broker in conjunction with building your new home at no additional cost.

Carrboro Recommends No New Tax

The Carrboro Board of Aldermen got its first look at Town Manager Steve Stewart’s $19.1 million fiscal 2010 recommended operating budget on Tuesday, which includes a revenue-neutral property tax rate of 58.94 cents per $100 of property valuation.

While the tax rate provides no increase in revenue for the town, taxpayers could see an increase in their tax bills, depending on how the recent revaluation affected their property values.

The budget includes $19,075,434 in recommended general fund expenditures and revenues, with property and sales tax accounting for 73 percent of revenues. The budget year begins July 1.

Town officials expect sales tax revenues to decrease by more than 9 percent in the coming fiscal year in addition to a significant reduction in grant funds from the state, equaling about 2 cents on the property tax rate.

“I’m hopeful that we will do better than this, but every month for the past number of months we’ve seen a decline overall, so we want to be very conservative and very safe,” Stewart said. However, he added, “Locally, we’re doing better than much of the state.”

The recommended 58.94 cent tax rate was adjusted down from the fiscal 2009 rate of 68.63 cents to account for the recent property revaluation. This year’s revaluation produced a tax base of nearly $1.9 billion, compared with about $1.6 billion in fiscal 2009.

Stewart said that while the tax base is larger than that of last year, the adjusted tax rate would level out town revenues from property taxes.

“We don’t get any more money out of the revaluation,” he said. The town’s key interests in creating a budget, Stewart said, were to avoid a tax-rate increase while maintaining current service levels and active employees’ jobs and benefits and continuing with long-term planned capital initiatives.

“The economic crisis is felt by everybody in this community, and putting this budget together we tried to be very sensitive to that,” Stewart said.
The budget represents an increase of $595,059 over fiscal year 2009. The increase includes non-recurring revenue and expenditure increases in installment proceeds to purchase vehicles and equipment, a transfer from the capital reserve fund to finance street resurfacing and income generated from recurring revenues.
To keep the tax rate down, Stewart recommended that only the Human Services Grant Funding program be expanded, with an increase of about $10,000.
Stewart also recommended the temporary suspension of the town’s pay-for-performance plan.
“No town employee would receive any salary increase,” Stewart said. He added the town wouldn’t see an increase in health insurance rates because town staff put out a request for proposals on health insurance plans.
Stewart also recommended the town continue a soft freeze on vacant positions.
According to Stewart, the town could potentially fill vacant police officer positions with grants from within the federal economic stimulus plan. Other opportunities from the stimulus plan include possible funding for sidewalk projects, bus shelters, bike lanes, fire substation funding and more.
Board members said they were pleased with the budget and commended Stewart for preparing a budget that included a revenue-neutral tax rate while maintaining services.
Board member Dan Coleman said Carrboro’s budget should serve as a model for other municipalities.
“It’s pretty remarkable to be able to maintain the status quo,” board member Lydia Lavelle said.
The town will hold a public hearing on the manager’s recommended budget on May 26 at 7:30 p.m. at Carrboro Town Hall.

Chapel Hill Proposed Tax Cut by 14%

CHAPEL HILL -- Town Manager Roger Stancil is recommending a budget that would cut the town's property tax rate about 14 percent, a level meant to generate about the same amount in property taxes as this year.

The proposed tax rate of 49.7 cents per $100 of assessed property value would mean a Chapel Hill homeowner with a $300,000 house would pay $1,491 in town taxes.

Coupled with a countywide tax rate expected to come in at 86 cents per $100 or lower, the owner of the $300,000 house would pay about $4,100 in town and county property taxes next year. That does not include the Chapel Hill-Carrboro City Schools special district tax, which last year ran about 20 cents per $100. The town is able to trim last year's 58-cent tax rate by dipping into about $2.5million set aside through cost-saving measures implemented last fall amid the global economic crisis, Stancil said. "We recognized that something was happening and decided to do something about it," he said.

The town is also able to avoid a major tax increase, despite about $6million in annual debt obligations, lower sales tax revenues, and a 17 percent increase in employee health coverage.

"Even with that increase, we were able to come up with a budget that's only a 0.3 percent increase over what we had last year," said Ken Pennoyer, town business services manager.

The budget proposes no layoffs or furloughs, and no salary increases for town employees. Stancil does propose siphoning $1.1million from the town's fund balance -- less than a quarter of the fund balance spent this fiscal year. The town still should be able to maintain its AAA bond rating with a fund balance of 13 or 14 percent of its $49.8million budget.

The town also avoided adding to its $60million debt load by delaying $20million in taxpayer-authorized borrowing at least until next spring, most notably for the expansion and renovation of the Chapel Hill Public Library.

"Hopefully we'll be moving out of the recession at that point," Pennoyer said.

"Our whole strategy is based around the belief that the economists are right," Stancil added.

May 22, 2009 -- Realty Times Feature Article

McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 4.82 percent with an average 0.7 point for the week ending May 21, 2009, down from last week when it averaged 4.86 percent. Last year at this time, the 30-year FRM averaged 5.98 percent.

The 15-year FRM this week averaged 4.50 percent with an average 0.7 point, down from last week when it averaged 4.52 percent. A year ago at this time, the 15-year FRM averaged 5.55 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.79 percent this week, with an average 0.6 point, down from last week when it averaged 4.82 percent. A year ago, the 5-year ARM averaged 5.61 percent.

One-year Treasury-indexed ARMs averaged 4.82 percent this week with an average 0.6 point, up from last week when it averaged 4.71 percent. At this time last year, the 1-year ARM averaged 5.24 percent.

"Long-term fixed-rate mortgage rates have remained below 5.0 percent for the past 10 weeks as the U.S. Treasury and Federal Reserve (Fed) act to keep interest rates low through security purchases," said Frank Nothaft, Freddie Mac vice president and chief economist. "The Treasury purchased $136 billion in mortgage-backed securities through April and the Fed bought $740 billion through mid-May. In addition, the Fed purchased $115 billion in Treasury bonds since March of this year."

"Housing construction continued to decline, as total starts fell to the lowest level since the Census Bureau began its monthly series in January 1959. While single-family construction appears to be near or at a bottom, multi-unit construction continued to recede. Reflecting the apparent stabilization in single-family construction levels, homebuilder confidence rose in May to the highest level since September 2008 and represented the first back-to-back up tick since February 2008."

For information on our local market, call me at 919-225-1393 or send an email to:  SmartMove123@Yahoo.com

1st Qtr 2009 Residential Sales in the Chapel Hill/Carrboro School District

What is going on in the Chapel Hill/Carrboro school district?

First quarter closings were down 42% compared to 1Q/08. The average sales price increased 11% to $433,000 and the median sales price increased 7% to $322,000.

What is happening with inventory?

Overall inventory decreased 6%, re-sale inventory increased 2% and new home inventory increased 17% compared to inventory levels at the end of 1Q/08. The average days on market for the active listings are 135 compared to the 105 day average at the end of 1Q/08. The number of sellers who have dropped list price from original list has increased to 355 from 306.

Are more choices producing more contracts?

The answer is still a resounding no. Contract pending levels for the county were off 35% compared to 1Q/08. This mirrors the trend seen in other counties in the Triangle. TMLS contract pending sales for the quarter were off 28%.

What is happening with closed sales?

There were 166 closings posted during the quarter, a decrease of 27% compared to 1Q/08.

How long is it taking for homes to sell?

The average days on market for homes that closed during the quarter was 109 days. The average at the end of 1Q/08 was 81 days. The average days on market for resale homes were 99 and the average for new homes was 146. The overall TMLS average has been 103 days.

How does the current supply compare with other areas in the Triangle?

The current supply based upon first quarter closings is 17 months, an increase from the 12 month supply seen at the end of 1Q/08. The current supply of housing located in the four main counties of Durham, Orange, Johnston and Wake is 10 months.

Give me some numbers

The average list price is $476,000, an increase of 4% compared to the average at the end of 1Q/08.

The average sold price was $336,700, up 8% compared to 1Q/08.

Where are people buying?

Meadowmont, Winrock and High Rock Village were the top sellers during the quarter. The average sales price per square foot was $139.59 and the average sales price/list price ratio was 95.45%.

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Tips for Analyzing Real Estate Investments

Every day you own your property you are making a real estate investment decision about it. Call it the "hold and do nothing" alternative.

Before thinking about disposing of a real estate investment you should consider how it might perform if you just keep it. The process starts with establishing what you have invested in the property.

Armed with a realistic estimate of what your cash proceeds of a sale would be after taxes, you can quantify the return you might expect if you keep the property instead.

Do the same kinds of projections that you would undertake when you study a property you are thinking of buying.

What will be the income from the property from year to year? What factors will af­fect your projections? If you own apartments, do you think rents will continue to increase because vacancy rates are still low and the value of your property and others like it is below replacement cost?

Or, do you think population is going to slide, apartment demand will decline, and so will rents?

If you own an office building, strip mall or other commercial property, what is your prognosis for the price at which leases will renew? Will there be a turnover of ten­ants? How long will it take to replace them? Can you expect to replace them at rates com­parable to the leases now in place?

If the property is raw land it has had no income, unless it is a parking lot down­town or has some other non-permanent income stream. A projection might include any means that comes to mind for generating an income that offsets holding costs.

The next ingredient after looking at income is operating expense. These are not regular and easily predictable if the owner has deferred a substantial amount of mainte­nance. What might have been maintenance chargeable as an expense may have now be­come a cost that you must capitalize.

Another wild card is utility costs. Can we continue to count on relatively inexpen­sive energy sources to keep heat and electric expenses in line? What is your prognosis for government-controlled water and sewer rates? Do you come to the same projections for future property tax rates?

Management expense merits review, too. Should the owner manage this property? Should there be a resident manager on a salary? Would a professional property manage­ment firm offer efficiencies?

Debt service usually is a regular and continuing expense. This review might sug­gest a conversation with the banker about refinancing or restructuring the debt.

Finally, at what price do you expect to dispose of the property? When? And how? Cash sale? Installment sale? Tax-deferred exchange? Through your estate? By a charitable remainder trust?

Taking into account the tax implications of each disposition, which nets the highest proceeds?

All these numbers leave you with a relatively simple financial calculation that gives the yield on the dollars now invested in the property. To start with, you have after-tax cash you might otherwise free up if you sold it. Over the years, the property produces varying amounts of income, after tax. When you dispose of the property, you get after tax proceeds, either all at once or over a future course of years.

You express that yield as a percentage of your current investment. This is the number you use to compare with your alternatives if you decide to dispose of the property now.

203K Program Enables Financing on Property in Need of Repair

Are you the type who can make a buck fixing up run-down properties? You might be someone who wants to buy a fixer-upper home and live in it. You might be interested in a small income property that needs work and has the makings of a nice owner’s unit. Or, maybe you have a home already and simply sense profit as an investor in below-standard properties.

Well, Uncle Sam has a deal for you! It’s an FHA mortgage program called 203(k). It’s not your standard purchase loan. With standard programs if the property needs work you have to go elsewhere for the fix-it-up money. If the property is seriously run down you can’t get any mortgage loan for it. You have to pay cash for it out of your pocket, fund the repairs yourself, then finance it later.

With 203(k) you get one loan for both the cost of acquiring the property and the repairs. The repair portion of the loan goes to an impound account that you draw upon as the work progresses. You can get an advance for some of the more expensive items like carpets and cabinetry. There’s usually a small holdback from each draw that’s released when all the work is done.

The down payment for an owner who will occupy the property is the same small amount as FHA’s regular programs, about 4.5 percent. Investors have to put 15 percent down, but that’s the lowest down payment of any investor loan program; most require 30 percent or more. The down payment is calculated on the estimated cost of acquiring the property, plus the repairs, or 110 percent of the as-repaired cost, whichever is less. If there is any money left over after the job is done it can be spent on further improvements, new appliances, interior and exterior painting, or it can be used to reduce the loan balance.

Just about any improvement qualifies. No, you can’t put in a swimming pool, bathhouse, dumbwaiter, outdoor hot tub, gazebo, tennis court or satellite dish. Aside from these luxuries, you can use the money for such things as code compliance and safety improvements, cosmetic updating, repairs to the electrical, plumbing and mechanical systems, roof work including gutters, replacement of tile, vinyl and carpet, and major landscape work. Making the home more energy efficient counts, as does providing handicapped access.

You can do the work yourself but you only get reimbursed for the materials, not your time. You build equity in the property, giving yourself a job improving it. All of a contractor’s approved billings are reimbursable from the escrow.

The program is a natural for the contractor or investor who wants to turn a property quickly after fixing it up. He or she puts up the 15 percent down, does the work, then sells the property with a loan in place that is the maximum FHA loan amount for an owner-occupant. The rehabber can take back secondary financing or get a cash down payment for the difference between the loan and the sale price.

This works nicely for a first-time homebuyer, someone who has not owned a home for three years, or a divorced or separated individual who has signed away any interest in the former home. These people can assume the loan with no down payment. What happens in practice, then, is a working partnership between the investor/contractor and the future homeowner. The homeowner finds the single family home, or duplex, triplex or fourplex. (Larger multi’s don’t qualify unless the number or units is to be reduced to four or fewer.) When the property is found, the lender works with the buyer’s investor/contractor, FHA’s fee inspector and the appraiser to see if the numbers work. If they do, the investor/contractor purchases the property, does the work, then closes with the homeowner afterward.

If the project involves loss of rental income during the rehab period, the impound account can include up to six months of mortgage payments. This helps the cash flow during the critical period of improvements.

This is a logical program for many areas of the country. Most of city’s housing stock is more than fifteen years old. Anything built before 1985 or so is cosmetically dated, at least. Yet these properties, particularly the small income units that investors have been holding, can be the new affordable housing in our changing economy.

A caution. This is a complex program. Most mortgage bankers don’t have much experience with it. HUD has been pushing the program and reportedly has goaded its field offices to lighten up on the paperwork. Nationwide more of these loans have closed in the past 18 months than in all the years since the inception of the program in the 1950’s.

Still, you should seek out a mortgage lender that has actually worked these loans to completion. They will know the personnel, including HUD staff, inspectors, appraisers and contractors, who have to be part of the team that’s required for your transaction to succeed.