Over the past few months in the Week in Review e-newsletter, the New Jersey Association of REALTORS® (NJAR®) has discussed the possibility of the New Jersey Legislature passing a bill that creates a state tax credit program for home purchases. Recently legislation, A-1678/S-692, was approved by the General Assembly establishing a New Jersey Home Buyer Tax Credit Program under the state gross income tax for home purchases made within a one year period following enactment of the law.  As a means of bolstering the Garden State’s faltering economy, the bill creates a refundable tax credit of up to $15,000, or 5 percent of a home purchase price (whichever is less) for qualified home buyers. If eligible for the credit, home purchasers will receive the credit over three years, during which time the home purchased must be used as a primary residence.

Under the current bill, $75 million in funding is set aside for the purchase of newly constructed homes and $25 million will go towards purchase of previously occupied homes. While NJAR® is working to have more money dedicated to the purchase of existing homes, the main focus of the bill is to put people in the building trades to work and stimulate the economy through income and sales tax revenue created by the new construction. NJAR® submitted a memo explaining the economic benefits associated with enacting a state home buyer tax credit and expanding it to include more existing homes.

Before this legislation can become law, it must be approved by the full state Senate and be signed by Governor Chris Christie. The full Senate may vote on the bill as early as its next scheduled meeting on June 10, 2010. To date, we have not received confirmation as to whether Governor Christie is inclined to support the legislation. Please stay tuned to www.njar.com and the Week in Review for any updates on this critical measure.

I just attended a seminar sponsored by KHOV at the Warren 55+ community. The speaker was Jeffrey Otteau of the Otteau Valuation Group, the leading analyst that looks at the NJ real estate market. I have talked about him before, as he has a huge following as he examines SOLD data and UNSOLD inventory.

He began by saying that this is a “window of opportunity” for buyers and sellers. There are 10,000 fewer homes on the market than last year, the lowest since the high inventories of ’07,’08 & ’09.
There is pent up buyer demand, homes are now more affordable with lower price AND lower interest rates and the incentives of the federal tax credits as I mentioned before in my previous blogs.
This is the time for sellers to get the best prices and buyers the best “payment”. Just FYI, for every 1% increase in interest rate, a buyer will lose 9% of purchasing power (or another way to say it is, it will now cost that buyer 9% more for the SAME house. Mortgage experts say that in preparation for the government ending their support of keeping interest rates artificially low at the end of March 2010, bond prices have already started to edge up. Many believe we will be at 6.5% interest rates in no time. It is/was foolish for buyers to wait until the last minute to capitalize on the federal tax credit deadline of going under contract BEFORE April 30, 2010, before the making their home purchase, as you will now have to pay more.

He reiterated that the recession most likely ended in Oct 2009, but we won’t see confirmation on that until this summer 2010. We are in a housing recovery and prices have stabilized! In NJ, the 1st quarter of 2009, prices went down 12%, 2nd quarter – down 10.4%, 3rd quarter – down 7.4% and 4th quarter – down 6 % compared to the 12 months prior.

More good news…In 2009, no increases in foreclosures in NJ.

We are now back to end of 2004 housing prices. Last year, pricing was down a gentle 4-5%.
When comparing to other states in the US, NJ has outperformed US average, up 129% since 1991. A very nice investment. NY has increased 105% and CA only 66% over the same time period.

Mr. Otteau admits that the future of the housing market in the 2nd half of 2010 is still questionable. The tax credit will now be gone, interest rates will be higher, prices have edged up a little higher—about 2% this year. The job market is still not clear. Thus a “slump” could begin in July 2010.

Regarding commercial real estate, NJ has suffered about a 5% loss as compared to Atlanta GA suffered a 50% loss of value.

UPDATE: Regarding this lovely home in Warren, it is now in attorney review after multiple offers!

I wanted to inform you of a brand NEW listing in Warren that just hit the market today. 40 Casale Drive So., Warren.

Great price of $799,900!

This home is meticulously maintained on a great, quiet cul de sac street!

Call me today!

This one won’t last.

January 2010 SOLD data is now posted.
Click on the “How’s the Market” tab on the website to review this town market information.

I am finding that many people still are either unsure about the new tax credit information or don’t even know about it…especially that it isn’t just for 1st time buyers anymore.

Since 11/09 when the government extended the 1st time buyer tax credit AND expanded the program to include other buyers as well, for up to $6,500, I wanted to educate my clients to help  determine if going under contract before the 4/30/10 deadline is the right decision for you.

Just a basic definition of a tax credit…this is a figure that directly comes off the bottom line of your tax return, off the amount you owe the government. This is after tax dollars.

There are many details of the program, so if you believe you would like to purchase at this time and benefit from this tax credit, please consult a tax attorney or your accounting professional. The summary I am providing you on this website is just that…a concise summary of the guidelines.

Tax Credit Information

Basics of the Program
The American Recovery and Reinvestment Act of 2009 includes a provision for qualified first-time U.S. homebuyers to receive a tax credit of up to $8,000.

In November 2009, the provision’s deadline was extended and the credit was expanded to give most other homebuyers a tax credit of up to $6,500.

The credit amounts to 10 percent of the purchase price up to the credit limit. So a home purchase of $80,000 or more would be good for the full $8,000 credit for “first-time” buyers; and a home purchase of $65,000 or more would be good for the full $6,500 credit for qualifying “repeat” buyers.

No credit is available for home purchases that exceed $800,000. The credit never has to be repaid, provided that the buyer continues to own and live in the home as a principal residence for a minimum of three years straight.

Under the deadlines revised in November, buyers must have a written, binding contract in place before May 1, 2010 and close before July 1, 2010.

Note: As with any tax legislation, the details can quickly become complex with individual filers’ unique situations. I cannot provide tax or legal advice. Please confirm eligibility and pursue filing questions directly with the IRS or their own tax professional.
Program Details

• An individual qualifies as a first-time buyer if neither he nor she, nor their spouse, owned a principal residence in the United States in the three years prior to closing. 
• An individual qualifies as a repeat buyer if he or she, or their spouse, owned and lived in a principal residence in the United States for five consecutive years within the eight years prior to the closing date. 
• Even if a co-borrower (or someone providing help with the down payment) is ineligible for the credit, the otherwise qualified buyer remains eligible – meaning a parent can help a child (nondependent and at least age 18) buy a home – and the child can receive the credit.
• Buyers can receive the full credit even if they don’t owe any taxes for the year in which they file for the credit.
• There are income restrictions, which were revised upward with the November modification. The full credit can be taken by individual filers with Modified Adjusted Gross Incomes up to $125,000 and joint filers up to $225,000. The credit phases out after that and is eliminated at $145,000 for individuals ($245,000 for joint filing). Be aware of the distinctions between Adjusted Gross Income, Modified Adjusted Gross Income and Taxable Income. This IRS Web page has details on calculating Modified Adjusted Gross Income.

I encourage clients to consult the IRS, IRS Web site or a tax professional.

With the turn of the monthly calendar to January 2010, I believe all typical cycles of real estate markets have been thrown out the window, this year.

Usual holiday downturn in sales did not happen this year. On the contrary….I believe we saw record sales. Of my own listings, we saw 3 go under contract in December, some that have been on the market for 4-6 months. Focusing on the new year, buyers are coming out of the woodwork to ask, “will there be more choices coming on in January?”. What a change of pace! With low inventory continuing, I am really seeing a shortage of properties for my buyers to purchase. I have numerous buyers just waiting for the right one to come on the market for them to jump at. I continue to tell my buyers, buy now…don’t wait. The closer you get to April, the more demand that will occur. Sellers continue to get more and more realistic and I am trying to show them that this increase in buyer demand over the next few months is a great opportunity to get their home sold.

What will happen to the typical “spring market”? I think it will be VERY early this year, as buyers need to be under contract by 4/30/10. Come April and May, we will be left with the buyers that weren’t able to take advantage of the government tax credits. Hopefully, they will be just as eager to finally purchase. Maybe they will have just SOLD their home during the “tax credit” months of Jan-April.

 Happy New Year to all. 2010 is starting off with a refreshing uptick. I look forward to making a lot of deals together.

Market activity in improving. I am seeing unprecedented activity for a December!

For those sellers that stayed on the market during this traditionally slower time, is seeing some benefit, since many homeowners have removed their home from the market at this time of year assuming it would be slow and also inconvenient because of the holidays. But my view has always been, if you want to sell, then you have to be on the market. Plus, the most motivated buyers sometimes appear at the end of the year, as either their home as sold and now need to find a home or RELO buyers that are looking to begin their jobs in January.

More news: our RE/MAX office will be moving their office space around the corner from its current location. A beautiful, former design center will be our new home, affording us more private offices, more efficient layout with similar square footage and a lovely fireplace and hardwood floors. There will be private parking just for our customers making it easier during the lunch hour when finding a parking spot can be difficult. I will let you know when our official move in date is.

Our office’s market share continues to increase. Our office of 44 full time agents is leading ALL real estate offices in dollar volume…with $104.5M YTD volume through the 1st ¾ of the year (9/30/09).

Compared to Weichert Warren at $83MM and Coldwell Banker Warren at $51.1MM

Specifically looking at Warren Township sales in 2009, we lead ALL offices with $30MM in Warren Township business compared to $19.8MM Weichert Warren and $11.5MM Coldwell Banker Warren.

Local Competitor Analysis: All Sales: 2009

Source: GSMLS September 30, 2009

Local Competitor Analysis: Warren Township Sales 2009

Source: GSMLS September 30, 2009

As the leaves on the trees finish their glorious metamorphosis and the colored leaves now lay on the cold, damp ground or blowing in the wind. This is a clear indicator that our year is coming to a close. The well known break in the public schools are happening now for “teacher’s convention”. Those school aged kids enjoy a nice break to relax or some families use it as a time for a quick vacation, since it is only Jersey school out at this time.  Also, we turn to thoughts of Thanksgiving creeping up on us.

For those of us who make real estate our career, we feel thankful today after learning that the government has decided to keep the incentives for 1st time homebuyers continuing into 2010. According to Charles McMillan, the 2009 National Association of Realtors (NAR) President, Congress passed a bill today that extends and expands the homebuyer tax credit. The extension and expansion will become effective as soon as President Obama signs the bill. The $8,000 tax credit will continue for 1st time homebuyers. For current homeowners to be eligible for the NEW $6,500 tax credit, they must have used the home, and sold the home or is being sold as a principal residence after living in it consecutively, for 5 of the previous 8 years.

This will hopefully be the boost to the real estate market continue upward in the sales activity for 2009-10. It should help more than just the lower end price points and first time buyers. Even before this positive news for the market, I have been very busy. This has not been a “typical” period, since by November; things typically start to slow down. I am not finding that to be the case this year. With interest rates still so low, the buyers that act now will look like a genius, as rates should only go higher from here. I believe, when we look back at the 2009 market trends next year, we will notice that June/July 2009 was a “low” and considered the right time to buy.

The commercial real estate market is another “bird” and an interesting one to evaluate in this market. Right now if you are a buyer in need of warehouse space in Central NJ, there is a glut of properties on the market. For many investors, the consideration to purchase a commercial property, one my evaluate  the rate of return—positive/negative cash flow. The deals that seem to make sense for people are one that have the buyer paying cash. The more money down, the smaller need for a mortgage payment-as this hurts your cash flow numbers when you need to borrow. And those that have so much cash on hand, would rather make a small positive cash flow, that have your money just sit in accounts making almost nothing.
 
I have a great investment property listed for sale in Bound Brook, NJ. Wonderful opportunity, especially for an “owner/occupier” need – someone who wants to use some part of the property for their own business use. This home is beautiful, fully renovated with the older Victorian charm from the late 1800s. Located in the “non-flood area”, this property could also be converted back to a single family use without need for a variance. The price is $429,000 with 6 units, huge on-site parking lot, and located within walking distance to Municipal Building, Police station, Post Office, Train , Business District(Main Street), Library, Schools, Houses of Worship, Theater, Firehouse, Banks and Route 28. All tenants have 1 year leases, separate utilities plus newer heating and cooling systems.

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a firsttime homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.

Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

After studying and attending seminars with mentors that I value and follow their advice and incite, many feel that home prices have definitely stabilized. That is really good news.

Brian Buffini just completed a webinar for his top coaching clients, and stated that we on the east coast follow the west coast… and since CA has suffered harder and prior to us, we can use that knowledge for what to expect here. He is seeing not only stabilization but in some markets out west, an increase in prices. He continued to state that 2010 will be up and down market as inflation tries to be managed. He spoke about the Eco boom generation as the current 18-28 year olds which represent 50% more people than the baby boomer generation. Eventually we will be dealing with a housing shortage as demand will continue to rise as this group becomes homeowners. So things are not bleak, by any means. However, we do still need to get out of this very tough financial picture with are currently facing.

In August, I earned the prestigious Certified Distressed Property Expert (CDPE) designation, having completed extensive training in foreclosure avoidance and short sales. I want to share this invaluable knowledge with my clients at a time when many homeowners are in a “distressed” financial situations and may already be dealing with foreclosure proceedings. Here is some good information about the basics about foreclosure avoidance for you as a homeowner, and what your options are.

Foreclosure Avoidance Options
Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to residents for foreclosure are many, including but not limited to short sales. Here is a brief explanation of these solutions:

Reinstatement: A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will “reinstate” a mortgage up to the day before the final foreclosure sale.

Forbearance or Repayment Plan: A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

Mortgage Modification: A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

Rent the Property: A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, can convert their property to a rental and use the rental income to pay the mortgage.

Deed in Lieu of Foreclosure: Also known as a “friendly foreclosure,” a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

Bankruptcy: Many have considered and marketed bankruptcy as a “foreclosure solution,” but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

Refinance: If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

Servicemembers Civil Relief Act (military personnel only):  If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

Sell the Property: Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

Short Sale: If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more. Many lenders are willing to do this, as it is a less costly option than owning your real estate.

This represents only a summary of some of the solutions available to homeowners facing foreclosure. I would be glad to evaluate your individual situation, property value, and possible options. Understanding your options now could help you make the best decision for you and your family.