Category Archives: Economy

Buy Now or Suffer 8,000 Consequences?

Today I got this email from a friendly neighborhood Realtor:

Hello everyone,

I wanted to send out a friendly reminder about the deadline to take advantage of the first time home buyer tax credit.  The tax credit expires on Novemeber 30th, 2009.  However, assuming a 45 day escrow period from the time you buy to the time you close and get the keys, you would need to find a house, negotiate a purchase price, and have mutual acceptance by October 15th to take advantage. There are some income restrictions, it must be for your primary residence, and you must not have owned a home in the last 3 years.  If you or anyone you know would like more information about the tax credit, please email me and I will follow up.

Arg! Less than a month to find a house and close escrow?

On the other hand, I heard a rumor that this tax credit may be extended. Hard to imagine we have the money to do so in this country, but still, that’s the gossip from my broker. Nick Timiraos of the WSJ blog writes:

Not only are some legislators (and real-estate industry lobbyists) already pushing hard for an extension of the tax credit, which will expire Nov. 30, but they’re also arguing that it should be increased, to $15,000, and expanded to all buyers, and not just those who are first-timers. The current $8,000 tax credit emerged in the stimulus legislation that Congress passed in February, replacing an existing $7,500 credit that had to be repaid over 15 years.

The questions are not just whether the country has this money available, but whether other issues, such as health care, will push the homebuyer’s plight to the back burner.

In the meantime, we first-time buyers have about a week to buy our homes, people. No pressure.

Generous Uncle Sam, Via Coldwell Banker

“Unexpected Jump In Home Sales in February”

Unexpected Jump in Home Sales in February:

-Sales of existing homes rose from January to February in an unexpected lift for the slumping housing market as buyers took advantage of deep discounts on foreclosures.

The National Association of Realtors said Monday that sales of existing homes increased 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest sales jump since July 2003.

-That was great news for buyers, who are paying the most attractive prices in years. Plus, interest rates have sunk to historic lows.

You’ll have to click through to the article to read the fine print. ;-) Regardless, it’s good to see a positive spin in the national media instead of the oh so beaten dead horse that is the negative.

Daily Depression: “Bank Stocks Sink On Renewed Worries”

From the San Francisco Business Times:

Investors’ growing nervousness about the depths of the banking crisis hit shares of major banks that were seen as weathering the financial storm better than most.

San Francisco-based Wells Fargo (NYSE:WFC) saw its shares hit a new 52-week low, closing at $13.69, down $2.07 or 13 percent.

U.S. Bank (NYSE:USB), with a large Bay Area branch network, also hit a new 52-week low, closing at $10.73, down $1.67 or 13.5 percent.

J.P. Morgan Chase (NYSE:JPM) closed at $21.65, down $3.04 or 12 percent.

Bank of America (NYSE:BAC) closed at $4.90, down $0.67 or 12 percent.

Citigroup (NYSE:C) closed at $3.06, down $0.43 or 12 percent.

The declines reflect growing concern on Wall Street that the economic downturn may worsen even further than previously expected. The nation’s financial system could be swamped by cascading bad debts from credit cards and auto loans to commmercial real estate mortgages as the recession deepens and unemployment rises.

Adding to the day’s worries was General Motors (NYSE: GM) and Chrysler going back with hat in hand to Washington, D.C., seeking billions more from the government. Also not helping matters was the worst showing for the Japanese economy in 35 years in the fourth quarter and concern that the U.S. federal stimulus package might not be enough to spur growth here at home.

Word from Moody’s Investors Service (NYSE: MCO) that some Central and Eastern European countries “have now entered a deep and long economic downturn” sparked concerns about the outlook for European banks with heavy exposure to countries such as Poland, Hungary and the Czech Republic.

At least the sun is supposed to come out tomorrow…

-Bank stock sink on renewed worries -SF Business Times

Can California Keep Her Bling?

 

I used to look at houses in Portland, OR like this 2/2 SFH in one of the most gorgeous neighborhoods, Sellwood, listed at $440K.

And then I would look for somthing similar in SF. And then I would need a very large martini. We all know, even after the martini, that a comparable home is SF (in a comparable lovely neighborhood) would go for twice or three times that price.

Experts in the field offer myriad explanations: SF has limited homes, limited land, high demand, good jobs, California property is worth more… etc., etc.

I am curious though how many of those factors still exist, or can continue to exist as the economic climate changes.

The Chron estimates that Bay Area homes lost $202 billion in value in 2008. Agreed, the Bay Area includes areas much harder hit by the slump than SF, but SF is not impervious to these problems. Maybe they aren’t horrible yet, but conditions aren’t as crazy-good as they used to be (right? We can agree on that at least?); could they get worse?

It seems that California itself is losing value. The S & P has already lowered her credit rating , tying her with Louisiana,  and may lower this rating again if the budget crisis can’t be solved– a phenomenon we have no real optimism to witness, unless we relish our tax refunds being issued as IOUs as part of the solution. From the LA Times:

“Should the state not enact timely midyear budget gap closing measures by February 2009, or should the state’s cash position weaken significantly compared with recently revised state cash flow projections,” the rating firm warns, the ratings on California’s long-term debt could be lowered, S&P said.

That could drive more investors away from California bonds, forcing the state to pay higher interest rates to borrow. Municipal bond yields in California and elsewhere have been surging in recent weeks as state budget troubles have deepened.

As for the prospect of borrowing to plug budget gaps, S&P warned that without “meaningful budget adjustments on the revenue or expenditure side,” California may face “constrained investor appetite” for its short-term notes.

In the meantime, Prop 13, once meant to protect the housing consumer, is now a very big part of the problem.

So my question is, can Californians expect to see deals like those in Portland, OR anytime in the near future in San Francisco? (And I pick Portland for its many similarities, physically and politically, to SF.) Ironically, though this would be a nightmare to some people, it would be a dream come true to the vast majority of renters who are currently priced out.  And if this untapped pool of buyers could actually buy, well…  we’d see that scary-good rush to buy again, like before the dot.com and current economy bust when people offered children and unneeded organs along with 50% over asking— but with distinctly post-bust differences.

U.S. Pending Home Sales Up 6.3%

Some good news in an otherwise gloomy picture:

The number of new sales contracts on existing homes jumped a seasonally adjusted 6.3% in December as buyers took advantage of lower mortgage rates and falling prices, a real estate trade group said Tuesday.The pending home sales index rose 6.3% in December and is now up 2.1% compared with a year earlier, the National Association of Realtors said. The increase points to a healthy gain in existing-home sales in January and February. The index is based on signed sales contracts, which usually occur a month or two before the sale is closed, when sales are reported in the NAR’s existing-home sales report.

-U.S. Pending Home Sales Up 6.3%: Realtors Say [MarketWatch]