Real Estate Coaching | Tim and Julie Harris: September 2009

Friday, September 4, 2009

Real Estate Coaching | Has Housing Reached Bottom?

Breaking News: Case/ Shiller Housing Index Shows Second Month In A Row Of INCREASE IN SALES!

“The animal spirits seem to be coming back,” said Robert Shiller, Yale economics professor and developer of the Standard & Poor’s/Case Shiller Home Price indexes. “The psychology does seem to be changing.”

The national home-price index released on Tuesday rose for the second straight month in June, fueling hopes the housing downturn, which is in its third year, is waning. Still, the index was off roughly 15% in the second quarter from the year-ago period. See Economic Report.

In a teleconference Tuesday, Shiller was reluctant to call a definitive bottom in home prices, saying he’s seeing “conflicting signals” in the housing market.

Well then, I will do it. There is a clear bottom in most housing markets for homes that are less than $200,000. Will this last? I think it will. There first time buyers and investors out there that there won’t be any further significant value decreases for homes less than $200k. Now, with that said, if the ‘First Time Buyer Credit of $8,000′ is not renewed….and if the banks make the mistake of dumping too many foreclosures on the market too fast…all bets are off.

On the positive side, the rise in home prices in May and June is a “sudden break in momentum” from years of nearly steady, punishing declines that may signal a turning point. “The roller coaster is now going up,” Shiller said.

Yet he noted what appeared to be a housing recovery in early 2008 “fizzled” when prices resumed their decline. And a long-term chart of home prices makes it look like “we are still in the process of a bursting bubble.” Shiller expressed “great reluctance” to forecast where prices will go from here with the U.S. economy in the midst of the most severe recession since the Great Depression.

Where will prices go? There WILL BE more depreciation for the more expensive…non first time buyer/ Investor price ranges. In some cases this depreciation will be dramatic. We are predicting that the next wave of foreclosures will force the ‘upper end’ housing markets to lose as much as 30%+ over the next 12-24 months.

“Unemployment looks like a bad indicator for the housing market,” Shiller said.

There are other challenges that could snuff out the nascent revival in home prices. One of the biggest threats is the mounting wave of foreclosures as more strapped borrowers struggle to meet their monthly mortgage payments. The First-time buyer tax credit is set to go away in November, and rising interest rates could also dampen sales, economists say.

Agents, it is NOT too late for YOU to become a REO Listing Agent. You already know that REOs are THE listings to have in this market. Watch the FREE Agent REO Secrets video now and then grab your FREE How-To list REOs Book.

The First-time buyer tax credit is set to go away in November, and rising interest rates could also dampen sales, economists say.

IF they don’t renew the buyer credit then YES…we are in trouble. But, they will. And I bet they will increase the ‘$credit’ AND make it available to everyone.

Here is an interesting thought for you….the $8000 buyer credit created demand..in many markets there has been so much demand that agents are selling the less expensive homes in 24 hours. What has this in turn caused…competing offers and increasing prices. So, someone was motivated to buy a home because they were getting a ‘credit’ from the government…they may of thought..”heck yeah I will buy now…I will get $8000 in free money”. As a result of this prices are pushed up. Buyers pay MORE for the home than they other wise would have. So, their $8000 in free money is in essence wiped out by the increase in price they are paying….

Indeed, recent experience has taught homeowners that prices can be very volatile, said David Blitzer, chairman of the index committee at S&P, during Tuesday’s call.

On a national level, home prices are back to levels last seen in 2003, but the cities that saw the biggest run-ups also fell the hardest.

“The idea that they could never go down was wrong,” Blitzer said.

He added the data coming out of the housing market in recent months have been encouraging, but warned against breaking out the champagne just yet. Commenting on so-called shadow inventory, he said many sellers have been waiting for an uptick in house prices to put their homes on the market, Blitzer said. This could exacerbate the supply glut and push a recovery further into the future.

Source: MarketWatch.com

Popularity: 3% [?]

Real Estate Coaching | Agent Social Media Coach

Hello,

As promised….here is the replay of todays Agent Tech Secrets teleconference.

Listen NOW to Agent Tech Secrets Call Replay.

This was a fantastic call…

When you listen to this intense 90 minute call you will hear directly from 3 agents who ARE making money from social networking.This is the information you need to get started online.

Topics we covered on this call:

1) How to convert real…honest to God…closed sales from social networking. Many agents are ‘on-line’ but, very few have discovered the secret sauce to make money. Listen now and you will directly from 3 agents who ARE making money from sites like Twitter, Facebook and Linkedin.

2) When you listen now you will discover the 6 ways agents screw-it-up online. We give you the DOs and most importantly the DONT’s!

Listen NOW to Agent Tech Secrets Call Replay.

3) For many agents trying to put all the pieces of the ’social networking puzzle’ together results in time wasting frustration. Listen now to this call replay as we give you the picture of what your puzzle should look like AND we will help you put it together.

5) Many agents are frustrated because they don’t know where to start online. They are confused about what social networking sites are important and the sites they should avoid. Listen now as we share with you the sites that matter now.

6) Perhaps most importantly, we will tell you how to make ‘contacts’ online…next, how to make those contacts into listings and buyer sales…YES, you will hear directly from 3 agents their exact real life examples of how they are making money from Social Media. (get this, one agent has listed and sold nearly 70 homes directly from social media…)

Go ahead and click this link to listen now to the replay:

Listen NOW to Agent Tech Secrets Call Replay.

Speak with you soon!

Tim

First Time Home Buyer Credit | Real Estate Coaching

Harris Real Estate University coaching students (and future students).

On today’s motivational message we shared with you a few ideas to avoid becoming complacent. What specific steps you need to be doing now to end your year strong. Remember the secret that we shared with you…your spring 2010 market is determined by what you do now. Top Producers know that the activities they do now will result in sales 5-6 months from now.

Use the information in this blog post to motivate your buyers to buy….and your sellers to price their home correctly to sell. There WILL BE (and is) a lot on positive momentum in the market as buyers rush to buy homes before the credit expires. Take action now and be part of that positive momentum.

Here is the info straight from Federal Housing Tax Credit.com:

Who is eligible to claim the tax credit?
First-time home buyers purchasing any kind of home new or resale are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.
What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
It is important to note that you cannot purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse. Please consult with your tax advisor for more information. Also see IRS Form 5405.
I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 14 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.

The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.

In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Popularity: 3% [?]

Real Estate Coaching | Realtor Training

Every week we receive literally hundreds of questions from HREU Students…(and future students). We welcome all questions and are happy to help.

(Would you would like to schedule a FREE Coaching Call with a Harris Real Estate University coach? Go here now.)

Here is the Question Of The Week:

“Dear Tim and Julie,

In my real estate market homes have depreciated more than 20%….in some markets homes are worth 30%+ less than they were worth only a few years ago! Matter of fact my own home is now worth far less than I paid for it in 2006. Everyday I come across sellers who are in the same position as me. Just today, I met with a seller who was $200,000 upside down in their home. The seller asked me if it made any sense for them to simply..’wait it out’ for the market to come back…

So, my question is..how long will it take for homes to be worth what they were in 2006-2007?….in other words…when will home values truly recover?”

Tim and Julie’s response:

The simple answers are…. years (and never). As in 10-20 years depending on your market. In some markets the homes will never be worth what they were in 2006-2007. The idea that homes don’t appreciate is a new concept for most of the country. But, the reality is in many parts of the country….there will never be a housing recovery in the true sense of the words. Homes were artificially valued based on once in a lifetime circumstances.

Lets use this recent article from the Orange County Register…using Southern California as an example:

An economist at the Moody’s credit-rating agencies has a new report out saying that you better not hold your breath waiting for a quick return to peak pricing for housing in California.
Economist Celia Chen thinks California pricing won’t regain its old peak before 2030. We decided to try to put that into perspective with the help of our trusty spreadsheet and some DataQuick data.

If annual gains were: New peak In months

3% Oct 2027 226

4% Mar 2023 170

5% May 2020 137

6% July 2018 114

7% Mar 2017 99

8% Mar 2016 87

9% Jun 2015 77

10% Nov 2014 70

15% Dec 2012 48

20% Jan 2012 37

25% July 2011 30

Let’s look at Chen’s call in Orange County terms. If she nails that 2030 prediction, that will mean that local housing will average annual gains of 2.7% percent for the next 21 years from January’s cyclical median-price low of $370,000. Let’s say those are slim profits. Compare that to other historic upticks for Orange County’s median selling price …

3.6% — Annualized gain made in the 20 years ended in July. Curiously, price have exactly doubled since July 1989, amid another great buying frenzy that ended badly.
8.5% — Annualized gain from the bounce from last cycle’s bottom (January 1996) to new peak (April 1998.)
11.7% — Annualized gains generated from the 1996 bottom of the last housing downturn to the June 2007 peak of $645,000!
17.6% — Highest average annual return in a 5-year period in DataQuick’s records. (60 months ended March ‘06)
20.8% — Highest average annual return in a 3-year period in DataQuick’s records. (36 months ended Feb. ‘05)

Want to make your own prediction, based on expected yearly profits going forward? See the chart at right that mixes annual rates of hosuing gains and when they rate would bring Orange County back to its June 2007’s peak of $645,000!

If annual gains were:	New peak	In months
3%	Oct 2027	226
4%	Mar 2023	170
5%	May 2020	137
6%	July 2018	114
7%	Mar 2017	99
8%	Mar 2016	87
9%	Jun 2015	77
10%	Nov 2014	70
15%	Dec 2012	48
20%	Jan 2012	37
25%	July 2011	30

Popularity: 2% [?]

How-To List REOs | Real Estate Coaching

Do you want to list REOs?

GO HERE NOW TO WATCH THE VIDEO

Heck yes you do! Afterall, in this market listing bank owned homes (REOs) is one of the best ways to make money.

One of the most popular coaching programs at Harris Real Estate University is Agent REO Secrets. Many of the top REO listing agents in the country are HREU REO Certified as a result of their graduation from this class.

Check out the FREE Agent REO Secrets Video…then grab your FREE how-to list REOs book.

GO HERE NOW TO WATCH THE VIDEO

Real Estate Coaching | Tim and Julie Harris

Friday, September 4, 2009

Real Estate Coaching | Has Housing Reached Bottom?

Real Estate Coaching | Agent Social Media Coach

First Time Home Buyer Credit | Real Estate Coaching

Real Estate Coaching | Realtor Training

How-To List REOs | Real Estate Coaching

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Tim and Julie Harris, Harris Real Estate University