What's Next?

[becki sanders]

Market's bottomed out? Real Estate will be flat for a while? It'll be
another two years before we see improvement? What should we believe
here?

In regards to more immediate fluctuations in the market, I'm wondering
how the Foreclosure Alternatives Act and regulation of short sales
will play a part in all this. To my understanding, banks are now
required to first see if homeowners are eligible for short sales
before foreclosing on them. Then the banks have to give homeowners a
"bottom $" price which the promise to accept if offered and must give
the owner at least 90 days to try to sell their home at that price.
So it seems that the next wave of foreclosures might be broken into a
few smaller waves of short sales.

I also wonder how the $8000 stimulus/tax credit is going to work out,
particularly during Dec/Jan when home sales tend to. If the
government is offering $8,000 through the end of November, that will
certainly inflate the number of people purchasing but once December/
Jan. hits, it seems like it suffer more from lack of buyers. The only
caveat to this is that flipper-investors will still be in the market
since for the $8,000 tax credit, you must own the home for 3 years or
otherwise pay back the money. I'm wondering if this will cause the
slow winter market to be prolonged through Feb/March.  What do you
think?

Tax Credit:
http://www.federalhousingtaxcredit.com/2009/faq.php

Short Sale Incentives/Regulations:
http://www.hollyleano.com/blogholly/index.php/2009/05/21/obama-administration-announces-financial-incentives-and-uniform-process-for-short-sales/

[Indigo O Dutton]

Hi Becki,

Don't have any insight on answers to your questions, but I did just happen
across an article on making a purchase with only $2500 down. Perhaps it has
been a lack of knowledge that has kept some people out of the market, and as
information spreads about ways very little money can get one into a
low-rate, fixed mortgage even more people will start buying in the coming
months. Also as job losses seem to stop accelerating people may have renewed
confidence. You can see the article I read at this link
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/got-2500-dollar
s-buy-a-house.aspx The main detail it presents is how you can borrow against
the $8k from the feds to put towards the closing costs (borrow from FHA or
HUD approved agency). So where you would need $10,500 for down payment and
closing costs, you would only need $2500.

Indigo

[Becki Sanders]

I have heard that too. I am wondering how many people are going to take out a bridge loan then once they get the $8,000, use it to pay off credit cards, buy cars or take vacations.  Those bridge loans generally are low-interest or no-interest short-term second liens secured by the property, and convert into second mortgages if they are not paid off with the proceeds of the tax credit.

I suppose it would be okay if they did that and paid off other debt, however, this is America, and in CA in 2007 about 30% of all new car sales were from home equity lines of credit. Hopefully we have learned our lesson.   

-Becki