December 2009


A Decade of Dramatic Developments

At the beginning of the 21st century, most home buyers had never viewed a home online; the three top home sale marketing methods were yard signs, newspaper ads, and open houses; and nearly nine out of 10 buyers financed their purchase with a fixed-rate, 30-year mortgage.

What a difference a decade makes.

“The real estate industry has seen tremendous change and evolution over the past decade,” said NATIONAL ASSOCIATION OF REALTORS® President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, REALTORS® have not only anticipated and adapted to the evolving needs of their clients and customers, but also have influenced industry trends and innovations that will carry us into the future.”

In 1999, buyers who went online in search for a home were in the minority – only 37 percent of buyers used the Internet in their home search, according to data from the NAR Profile of Home Buyers and Sellers. Today, 90 percent of buyers are searching online, and the real estate industry has responded. Sites like REALTOR.com, which attracts nearly 12 million total visits every month, have evolved to gives today’s buyers what they want – not just property listings, but multiple photos, online videos, mapping features, and comprehensive neighborhood information, as well.

Median home values over the past decade have increased more than 25 percent, from $137,600 in November 1999 to $172,600 in November 2009 (the most recent existing-home data available). Fewer people are buying detached, single family homes – 82 percent in 1999 compared to 78 percent in 2009 – but more people are buying homes in suburban neighborhoods – 46 percent in 1999 compared to 54 percent today.

Buyers themselves have also changed. A smaller proportion of married couples are buying homes these days; while married couples comprised 68 percent of all home purchases at the beginning of this century, they represent 60 percent of all buyers today. Single men and women have made up the difference – single men purchased 10 percent of all homes last year, compared to only 7 percent 10 years ago. Single women now represent more than one-fifth of all home buyers – 21 percent, up from 15 percent in 1999.

Other things haven’t changed. The median age for home buyers last year was 39, just as it was in 1999. Neighborhood quality, affordability, and convenience to work and school have consistently been top priorities for both past and present buyers. And eight out of 10 recently surveyed consumers believe that owning a home is an investment in their future.

“REALTORS® have been around for more than 100 years, but one constant during that time has been the persistence of homeownership as the American Dream,” said Golder. “As the first decade of this century comes to a close, NAR stands ready to meet the many challenges and opportunities that lie ahead by helping our REALTORS® members better serve their clients and communities and ensuring that those dreams of homeownership remain possible for all who want to achieve it.”

Inheriting Property Could Get Complicated

If the U.S. Senate fails to pass an estate tax bill, the estate tax disappears Jan. 1. But it’s not all good news. By law, the tax will reappear in 2011 with higher rates and lower exclusions.
 
Under the law that takes effect Jan. 1, taxpayers will face capital gains taxes on inherited property. The tax will be calculated on the original cost of the property to the person who has died. This could be extraordinarily complicated: “How much did grandpa pay for that piece of property 75 years ago?”
 
It is likely that the Senate will pass a one-year extension of the current law, with a retroactive date to Jan. 1, 2010, buying time to fix the situation. But that will almost certainly result in a rash of lawsuits that could make inheriting property in 2010 no less murky.

As many exotic adjustable rate mortgages (ARMs) are set to recast in 2010, the Consumer Mortgage Audit Center (CMAC) is projecting a mortgage crisis in 2010 as large as the subprime.

“We’ve spoken to Florida attorneys who sit at the forefront of the U.S. foreclosure crisis and have learned that 53 percent expect recasting ARMs to present a mortgage crisis as large as subprime and 61 percent expect to work on more loan modifications in 2010 than they did in 2009,” said Sylvia Alayon, VP of operations for CMAC “The New Year is going to hold very rude awakenings for some homeowners, but there are things you can do to analyze your situation and get help if you need it.”

Option ARMs enable borrowers to make monthly payments that are interest and principal, interest only, or just part of the interest due. After months and years of paying less than their full monthly payment of both interest and principal, many homeowners accumulate negative amortization. This means the amount of interest due on a loan becomes higher than the amount of the actual loan itself. As the majority of ARMs begin to recast in early 2010, housing bills will inflate, and many homeowners will be forced to repay the negative amortized balances.

“Recasting will undoubtedly lead to another wave of foreclosures as payments begin to double and triple,” Alayon said. “When principal balances go up and house values continue to plummet, refinancing will no longer be an option for homeowners in negative amortization.”

According to Alayon, only a few option ARMS in existence have been modified, but she believes many more homeowners will rush to modify their loans as they slip closer to negative amortization. Homeowners who act now to modify exotic mortgages may be saved from negative amortization and eventually foreclosure, Alayon said.

“Depending on each homeowner’s unique financial situation, we’ve seen everything from lenders modifying mortgages lower to make them affordable again to Fannie Mae allowing homeowners facing foreclosure to shift from homeownership to home rental,” said Alayon. “Options are out there, but you have to do some work to get to them.”

The data used to create CMAC’s prediction of a major mortgage crisis in 2010 came from the responses of 150 Florida Bar Association attorneys from November 3 to November 6, 2009, in a survey sponsored by CMAC. Responding attorneys specialized in real estate, general practice, civil law, and foreclosure defense.

As a due diligence and consulting company, CMAC specializes in the field of mortgage forensic research and analysis. The company boasts a specialized team of mortgage experts who are also members of the American College of Forensic Examiners and represent a combined experience of over 80 years in mortgage finance and law.

NEW YORK – Tavern on the Green, once America’s highest-grossing restaurant, is singing its culinary swan song.

The former sheepfold at the edge of Central Park, now ringed by twinkling lights and fake topiary animals, is preparing for New Year’s Eve, when it will serve its last meal. Just three years ago, it was plating more than 700,000 meals annually, bringing in more than $38 million.

But that astronomical sum wasn’t enough to keep the landmark restaurant out of bankruptcy court. Its $8 million debt is to be covered at an auction of Baccarat and Waterford chandeliers, Tiffany stained glass, a mural depicting Central Park and other over-the-top decor that has bewitched visitors for decades.

Even the restaurant’s name is up for grabs. At stake is whether another restaurateur taking over the 27,000 square feet of space, owned by the city, can reopen as Tavern on the Green.

For 75 years, since it first opened amid the Great Depression, the Tavern has attracted clients from around the world.

“This reminds me so much of Poland!” exclaimed Vermont resident Meg Kearton as she entered for her first time in late December. “It reminds me of a restaurant in Warsaw — the grandeur and the colors.”

She came for lunch a few days after Christmas, whose green and white colors fill the Tavern’s year-round wonderland of lights, flowers and ornamental curved bull’s-eye mirrors.

Hanging over the main Crystal Room, an all-glass dining area, is a century-old chandelier made of green glass, said to have been owned by an Indian maharajah. Two elk decked with red and green ornaments stand at the entrance, and outside is a huge King Kong topiary.

Former Tavern mogul Warner LeRoy, befitting his heritage as son of a producer of “The Wizard of Oz,” searched the globe for the whimsical goods after he took over the Tavern’s lease in 1973. He died in 2001, leaving the business to his wife, Kay LeRoy, and daughter Jennifer LeRoy.

As the end of the family’s operating license approached, the city sought competing bids.

The LeRoys lost to Dean Poll, who operates the stylish Loeb Boathouse restaurant overlooking the Central Park lake and offered to invest $25 million on Tavern renovations. The city awarded him a 20-year license in August, citing his significant capital investment and vision; the new Tavern will incorporate green building technology while a conservatory-style dining space will complement the original Victorian architecture.

Poll also plans an outdoor cafe, bicycle racks and new public restrooms.

The LeRoys, employing more than 400 unionized workers with full benefits, couldn’t match that. As the recession hit, they accrued more than 450 creditors.

A spokeswoman for the company running the auction said the LeRoys couldn’t be reached for comment Wednesday, but people close to 31-year-old Jennifer LeRoy said she feels heartbroken over the closure and betrayed by a city that pulled the lease to a business her father turned into a New York icon.

The decisive moment in the intellectual-property dispute over the name comes in January. That’s when a Manhattan federal judge will either side with the city and rule that the moneymaking name Tavern on the Green, valued at about $19 million, can be used by whoever operates the space or say the LeRoys own it.

If the city loses, Poll will use the name Tavern in the Park, creating a new menu of American cuisine with fresh seasonal ingredients and reopening by March, said his attorney, Barry LePatner.

“We’re going to bring the park into the restaurant,” said LePatner, by eliminating the thick shrubbery around the premises to reveal Sheep Meadow, where the animals grazed until 1934, housed in the 19th century Victorian Gothic shed that is part of the restaurant.

Just about everything from the current restaurant will be for sale Jan. 13 through Jan. 15 at a Guernsey’s auction held live at the Tavern, with a public preview there from Jan. 6 to Jan. 12.

The city’s parks department has asked the bankruptcy court to bar the sale of items that “cannot be removed without irreparably damaging the space they occupy,” according to an objection that department lawyers filed in court this week.

Those items include lavish decorative elements on the Crystal Room ceiling, chestnut paneling, brass lettering for The Bar and six banquettes.

A judge has scheduled a hearing on the disputed items for Jan. 11.

The dazzling decor was once a backdrop for private milestone events as well as public celebrations from film productions and political gatherings to the special carb-loading dinner on the eve of the New York Marathon.

Recently, as many as 1,500 meals could be served a day, with dinner entrees costing $26 to $42 on a menu heavy with meat and potato dishes, plus standard seafood and a few forays into foreign fare such as risotto.

Not everyone drips with praise for this “tourist trap,” as one contributor on the Web site Yelp called it.

Another Yelp contributor didn’t mince words: “Besides my risotto being just eh, and besides finding a small bug on my plate, I had a fiasco getting my jacket from the coat check.”

That didn’t deter a smiling Diane Allen-Smith from coming for a lunch with her husband in December, three years after their Tavern wedding, on a visit from Boca Raton, Fla.

“Our wedding food was wonderful,” she said. “And we didn’t have to do anything for the rest.”

A New York magazine reviewer once asked, “So what if the Eisenhower-era menu is strictly an afterthought?”

But the things that annoy some about Tavern on the Green are exactly what made it irresistible to fans, including three generations of a family from New York’s northern suburbs.

“My parents brought us here,” said Lisa Holz, who brought along her daughters, 4-year-old Kayla and 7-year-old Erika, and her husband and parents.

It would be her last time at the old Tavern on the Green, and she got sentimental.

“When I was little,” she said. “I remember getting tears in my eyes when I looked at all the lights and colors.”

____

On the Net:

Tavern on the Green: http://www.tavernonthegreen.com

Erin Meredith, CMPS®

The Meredith Team
Danville, CA 94526

925-918-0585 direct
925-918-0585 alternate
925-226-3215 fax
erin@cmgmortgage.com
http://www.cmgmortgage.com

Special Tax Break for Seniors Over Age 70 1/2

In 2009, many taxpayers over age 70 1/2 are allowed to skip one year of withdrawals from their retirement accounts without penalty! Typically, you must take minimum distributions from your retirement accounts after age 70 1/2 in order to avoid paying penalties. This is known in tax lingo as a “required minimum distribution”, or “RMD.” Under normal conditions, the RMD rules would not be that big of a problem for most taxpayers because they simply require you to start drawing income from retirement funds that you’ve accumulated over the years.

However, in light of the most recent turmoil in the financial markets, now is really not a good time for most people to be selling investments at depressed market prices in order to draw income from their retirement accounts and meet the RMD rules. That is why Congress and the President agreed to waive the RMD rules for one year — 2009 — and allow many seniors age 70 1/2 and older to leave their money in their retirement accounts. If you meet the requirements for this new law and decide to leave your funds in your retirement accounts, you could potentially achieve two enormous benefits:

  1. You could avoid depleting your investment accounts after they have declined in value due to adverse market conditions
  2. Your retirement accounts could be better prepared to participate in potential investment gains if the financial markets recover in 2009

Interestingly, since 1926, we have had 13 bear markets total, 9 of which (including the current bear market) were combined with a recession. In the 8 prior bear market-recessions, the average decline on the S&P 500 was -39%. The average 1 year return on the S&P 500 after the lowest point of the bear market was +46%. In other words, if history is any guide, the markets could recover quite nicely once this bear market is over. If you keep your funds invested in 2009 instead of taking minimum distributions, this could pay off well for you.

Of course, it is important to note that I am providing this information to you as your mortgage planner, in order to make you aware of some of interesting ideas that may benefit you. I am not an investment, tax, or legal advisor, and this information does not constitute legal, tax or investment advice. I definitely recommend that you consult with properly licensed legal, tax and investment advisors for specific advice pertaining to your individual situation.

Erin Meredith, CMPS®

The Meredith Team
Danville, CA 94526

925-918-0585 direct
925-918-0585 alternate
925-226-3215 fax
erin@cmgmortgage.com
http://www.cmgmortgage.com

Homebuyer Tax Credit for Individuals on Qualified Extended Duty Service

There are special rules that apply to the homebuyer tax credit if you are a member of the uniformed services, the Foreign Service of the United States, or an employee of the intelligence community.

Here is how it works:

  • A “first time home buyer” is defined as someone who has not owned a primary home in the last three years. If you are a “first-time home buyer”, your tax credit will amount to 10% of the purchase price of your new home not to exceed $8,000.
  • A “long-time resident” is defined as someone who has lived in the same primary home for 5 out of the past 8 years. If you are a “long-time resident”, your tax credit will amount to 10% of the purchase price of your new home not to exceed $6,500.
  • The tax credit does not need to be paid back if you continue living in the home as your primary residence for three years without selling it. If you sell the home in connection with government orders for official service, the credit does not need to be repaid even if you sell your home within the three year timeframe.
  • The home must be purchased for less than $800,000 before May 1, 2010. If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010. If you have served for at least 90 days of the year outside of the United States, you have until May 1, 2011 to purchase your home and receive the tax credit. In that case, if you sign a binding contract to purchase a home before May 1, 2011, you would need to close on the transaction before July 1, 2011.
  • Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
  • You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendent (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others.
  • If you are married, both spouses must qualify for the credit.
  • If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify. However, the total credit taken cannot exceed $8,000 (or $6,500 for “long-time residents”). Alternatively, if only one of the unmarried buyers qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit.
  • The credit applies even if you have co-signers on your mortgage loan.
  • The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others.

SHOPPING AROUND FOR A MORTGAGE
Here’s the inside scoop on how to do it right.
 

Erin Meredith, CMPS®

The Meredith Team
Danville, CA 94526

925-918-0585 direct
925-918-0585 alternate
925-226-3215 fax
erin@cmgmortgage.com
http://www.cmgmortgage.com

 

Always make sure you are working with an experienced, professional lender. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are four simple questions your lender absolutely must be able to answer correctly. If they do not know the answers immediately leave and go to a lender that does.

  1. What are mortgage interest rates based on? The only correct answer is Mortgage Backed Securities or Mortgage Bonds, not the Fed or the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. Do not work with a lender who has their eyes on the wrong indicators.
  2. What is the next Economic Report or event that could cause interest rate movement? A professional lender will have this at their fingertips. To receive an up-to-date weekly calendar of weekly economic reports and events that may cause rates to fluctuate, contact a Certified Mortgage Planning Specialist professional today.
  3. When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? The answer may surprise you. When the Fed makes a move, they are changing a rate called the “Fed Funds Rate”. This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets. For more information and explanation, contact a CMPS professional today.
  4. What is happening in the market today and what do you see in the near future? If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.

Be smart… Ask questions… Get answers!

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life but CMPS professionals do this every single day. It’s your home and your future. It’s our profession and our passion. We’re ready to work for your best interest.

 

fast facts
  • What are mortgage rates
    based on?
  • What is the next Economic
    Report or event that could
    cause interest rate movement?
  • When Bernanke and the
    Fed “changes rates”, what
    does that mean?
  • What is happening in the
    market today and what do
    you see in the near future?

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