Purchaser

US Unemployment Over 10% as Housing Tax Credit Passes Congress

By Chris McLaughlin

Tax credit

It’s here!  The U.S. House of Representatives has just voted (403-12) to extend and expand the homebuyer tax credit, and it’s on its way to the President for his signature…he’s expected to sign it today.  Not only does it extend the tax credit, but it expands it.  The items carried over until April 30, 2010 are:  Amount of Credit ($8000 or $4000 married, filing separate) and Definition for Eligibility (May not have had an interest in a principal residence for 3 years prior to purchase).  The items added to the credit, from December 1 to April 30 are, for current homeowners:  Amount of Credit ($6500 or $3250 married, filing separate); Effective Date (Date of Enactment); Definition for Eligibility (Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years); Termination of Credit (Purchases after April 30, 2010); Binding Contract Rule (So long as a written binding contract to purchase is in effect on April 30, 2010, the p
urchaser will have until July 1, 2010 to close); Income Limits ($125,000 – single $225,000 – married Additional $20,000 phase out); Limitation on Cost of Purchased Home ($800,000 Effective Date of Enactment); Purchase by a Dependent (Ineligible Effective Date of Enactment); Antifraud Rule (Purchaser must attach documentation of purchase to tax return).

Unemployment over 10%

According to the long-awaited report from the Labor Department, in October unemployment rose to 10.2% for the first time since 1983 – much worse than expected.  There was a net loss of 190,000 jobs in October, an improvement from a revised estimate of 219,000 job losses in September, but far worse than the 175,000 jobs forecast by economists surveyed by Briefing.com.  This is the 22nd straight month of job losses.  The Obama administration estimated last month that 640,000 jobs were created or saved by the federal stimulus package passed earlier this year but, while that makes good politics, it’s nothing compared to the 7.3 million jobs that have been lost by the economy since the start of 2008.  Today’s report comes one day after Congress voted to extend unemployment benefits by up to 20 weeks.

There are now a record 5.6 million people who have been unemployed for six months or longer, as the average time an unemployed person has been out of a job hit 26.9 weeks. According to a survey of top forecasters by the National Association of Business Economics last month, the consensus estimate among economists was that unemployment would hit a high of 10% in the final three months of this year and the first quarter of 2010.  But get this – the five economists with the most bearish forecasts had expected unemployment to rise to 10.2% in the fourth quarter of this year before hitting 10.5% in the first half of next year.

Short sales don’t hurt credit scores

Sarah Davies, vice president of VantageScore, at the Loan Modifications Conference now underway in Dallas, Texas, says restructuring plans on a mortgage, whether in the form a forbearance, modification or short sale, have a relatively insignificant effect on the consumer’s credit score.  VantageScore measures the generic consumer’s credit score and his or her likelihood of slipping into 90-plus day delinquencies on a scale of 501 to 990. If a servicer reduces a consumer’s original loan amount from 10-to-30%, the consumer’s credit score is only increased by three to 18 points, depending upon the consumer’s initial standing. Borrowers in the top-tier of credit scores, averaging an 862, receive only a three-point increase. Lower tier borrowers, in the 625 range, can receive an 18-point jump.  The credit score increases because the total amount of debt owed is reduced, and the borrower becomes inherently more reliable, Davies said.  However, foreclosure and bankruptcy c
an more severely affect the consumer’s credit score. If a borrower, who maintains good credit, is foreclosed, his or her credit score can decrease by as much as 140 points. Bankruptcy for someone in good credit standing results in a reduction of 365 points from the consumer’s credit and a mark on the file for seven to sometimes 10 years, Davies said.

Mortgages rates drop

Freddie Mac said the average rate for a 30-year fixed-rate mortgage (FRM) was 4.98% with an average 0.7 point, down from an average 5.03% the previous week. One year ago, the average rate for a 30-year FRM was 5.88%.  It said the average rate for a 15-year FRM was 4.4% with an average 0.6 point, down from 4.46% the previous week. A year ago, the rate was 5.88%. Freddie said the five-year Treasury-indexed adjustable-rate mortgage (ARM) was 4.35% this week, with an average 0.6 point, down from last week’s 4.42%. The one-year Treasury-indexed ARM averaged 4.47% with an average 0.5 point, down from last week when it averaged 4.57%. At this time last year, the 1-year ARM averaged 5.25%.  Bankrate.com’s survey of major US banks and thrifts put the 30-year FRM 5.35% with a 0.31 point, even with the previous week. A year ago, Bankrate.com’s survey was 6.44%. It says the 15-year FRM is 4.72%, down from $4.74% in the previous week.  Bankrate.com put the five-year ARM 4.64% this w
eek, even with the previous week.

Commercial and Multifamily Mortgage Originations Remain Low

According to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations,  commercial and multifamily mortgage loan originations for the third quarter of 2009 were 12 percent lower than during the second quarter of 2009, and 54 percent lower than during the same period last year.  The 54 percent overall decrease in commercial/multifamily lending activity during the third quarter was driven by year over year decreases in originations for all property types.  When compared to the third quarter of 2008, the decrease included a 62 percent decrease in loans for retail properties, a 59 percent decrease in loans for health care properties, a 58 percent decrease in loans for industrial properties, a 56 percent decrease in loans for office properties, a 46 percent decrease in hotel property loans, and a 40 percent decrease in multifamily property loans.

Now on to our real estate investing educational arena…

Friday File – More Real Estate Humor

Ahhh…Autumn weekends. Chances are you might be out and about with family or friends, visiting fall festivals or simply cruising around the countryside searching for your next short sale. Whatever the weekend has in store, it’s sure to be just a little bit better if you start it with a smile on your face. To help, here’s our newest Friday File to help you make the most of government lingo and double-speak.

Filibuster = a well known stalling technique that allows government officials to read (at least partially) the bill before voting or, when used as a “sister” to the “dust buster”… a way of collecting (for the record) official sounding statements to eliminate personal responsibility in order to stay on the safe side for the next election.

Sustainable Communities – once put together, you have no hope of respite. They keep going and going and going…

War On = We need funding fast so declare a war in order to enact the emergency funding mechanism rather than go through the normal debate and votes…ie, the war on drugs, the war on poverty, etc…

Biosolid Fuel = Recycled sewage

Consumer = American citizen

Taxpayer = American citizen

Voter = American citizen

American Citizen = Endangered species being overtaken
by “citizens” (small case).

Competitive = Lowest bidder wins.

Satisfactory = It barely passes but with any luck, won’t kill the end user.

Revenue Enhancement = For us silly not you! We are going to raise your taxes till you squeal.

Change = Retroactive, future and present modification of the entire economy, healthcare system, tax structure and political system.

Double-Think = Modern day media literacy

See you at the top!