Jim Weichert, CEO of the largest independently owned real estate brokerage in the world says, “the overall economy has recently shown encouraging signs of life. The real estate market has had many months of ongoing improvements, and I am confident that the extension and expansion of the home-buyer tax credit will cement the ongoing recovery into the spring market.” Simply put: the market must go on, but is it fair to everyone: buyers, sellers and real estate professionals alike? No, not in the least. Take a look at our real estate predictions for 2010: the good, the bad and the ugly.
What buyers need to know for the NJ real estate outlook in 2010.
- The 2009 $8,000 first time home buyer tax credit was extended and improved.
- The new tax credit includes provisions for both first-time and repeat home-buyers.
- Buyers must be under contract by April 30, 2010 and closed by June 30, 2010 to meet credit guidelines.
- Current homeowners (Repeat Buyers) are eligible for a up to a $6,500 tax credit as long as they have lived in the home they are selling or have sold as a principal residence for five consecutive years out of the previous eight years and the new home they buy will be their primary residence.
- Income limits for eligible buyers were increased to $125,000 for single buyers and $225,000 for couples.
- Tax credit not applicable for purchases greater than $800,000.
- For buyers buying a multifamily property, the tax credit is applicable to the unit the buyer intends uses as his/her principal residence. A buyer cannot use credit on full purchase price. Tax credit is based on a purchase price/number of units * 10%= a tax credit not exceeding $8, 000.
- Buyers buying a property with parents or co-borrowers can still qualify for a full tax credit if buyer has not owned a home in the previous three years.
- Pressure to increase interest rates is eminent. Rates have gone up steadily in the past 4 weeks according to CNBC. In many NJ towns, prices have already adjusted and normalized. But if rates goes up, your cost per month to live in same home will also increase. Conversely, if rates increase, prices may adjust 8-10% to compensate in change in interests rates.
- Guidelines for FHA loans (the only comparable mortgage loan alternatives to sub-prime lending) are changing. The new bare minimum, middle credit score is predicted to become 640 as oppose to 620. In general, the qualifications for qualifying for a mortgage loan purposefully adjusting to make it harder to qualify for a mortgage: the future will bring new guidelines calling for higher credit scores and rumors has it that FHA loans will require a new bare minimum payment down-payment of 5% as oppose to 3.5%. Certainly, buyers will start to feel a sense of urgency in late January when things are back to work as usual.
- Buyers have more houses to choose from i.e. REOs, Pre-foreclosure short sales and normal re-sales. Depending in the each township individual market, property location, condition and price point, some buyers may find themselves in a multiple offer situation. $230, 000 up to $325, 000 can be a competitive price point for many buyers.
- Buyers should speak to a qualified mortgage representative before previewing homes so that they can act fast in the market place if they intend to compete with other buyers or even qualify for the tax credit.
- NJ homes sale prices have adjusted 8-28% from home sale prices of 2006-07, making homes more affordable across the board.
- Buyer beware of Pre-foreclose short sales and REOs. Buying Process my affect their ability to meet tax credit deadline.
- Say hello to Broker Rebate for Buyers in the Summer. When the tax credit ends, Buyer will be enticed to buy a home with broker rebates. We have a rebate called the you pick three speical. Two days before Gov. Jon S. Corzine was due to leave office he signed two pieces of real estate related legislation into law, according to a release. The state’s housing crisis influenced state politicians to sponsor real estate laws that both benefit victims of foreclosures and buyers looking to take advantage of the down market. The first measure now makes it legal for real estate brokers to pass some of their profits onto their clients. Before this latest move, it was illegal for real estate agents to entice potential clients with the promise of a cash. New Jersey was one of 11 states that didn’t allow the incentive. The act allows an individual real estate agent to decide whether to pay their clients or not, and stream lines business policies for some nationwide real estate brokerages.
- Investors may find more deals in the market place for rental income.
- Banks are holding back selling off inventory as to not upset the market place. Expect massive unloading in early 2011.
What Sellers need to know for the NJ Real Estate outlook in 2010:
- More serious buyers in the marketplace makes selling your home easier. Pricing, condition, and location will affective your property’s marketability of which you control the first two variables.
- Priced to sell homes will go under contract and possible close within a 30-90 days time frame.
- For homeowners experiencing a hardship, you have options. You can modify your loan, seek of a deed for lease option or even negotiate a short sale. Beginning on April 1st, 2010, the federal government will provide incentives for banks to streamline the short sale process, which would give you an approved short sale price to market to buyers.
- If you are a trade up or down homeowner and meet the definition of a repeat homebuyer, you can receive a tax credit for making a purchased before June 30, 2010.
- If rates go up, prices are likely to adjust. Selling in the first two quarters of the year can be a difference of tens of thousands of dollars. The time to sell is now.
- Selling by a home by owner can be more difficult in this market given strict qualifications standard for buyers to get mortgage approval/commitment. 9 out of 10 buyers use a real estate agent when considering a purchase as large as a home. Second, selling a home is generally a time commitment of 3-6 months or more depending on the township; in which case, according to NAR 7 out of 10 For Sale by Owners (FSBOs) either do not sell by owner, change their plans altogether or list with a real estate broker.
- Despite changes in the market, you might be paying taxes on inflated values. The number of tax appeals are likely to double and you should challenge your taxes if you feel you can make a case.
What Real Estate Agents need to know for the NJ Real Estate Outlook in 2010:
- Pre-foreclosure short sales are here to stay at least for the next 2 years. You will have to learn how to qualify your sellers for some sellers cannot be helped and it’s possible that some sellers do not want to help themselves.
- Focus your marketing efforts on markets where buyers are motivated to buy based on location, school systems and NYC transportation.
- Pricing a home to sell is more important than ever before. If you find your listing going stale within the first 30-90 days, you may have to ask your client to spruce of the home and even adjust price.
- 2009 was an adjustment period for many agents. If you survived 2009, you can survive 2010. Having sold houses in 2009, you can clearly identify how many houses you need to sell to meet your desired income. Lower prices, lower commissions and more transactions to close.
- 2010 will be the year of social media marketing. You will find leads and referrals from your Internet presence or your participation on social or business networking sites. The problem with social media though is that it can be time consuming and unmeasurable. Social media can also be too transparent. Make sure you are adhereing to your company’s guidelines and your presence on the web adheres to the REC rules and regulations regarding advertisting and marketing.
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