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What’s On The Horizon?
By Bill Swift Wiest Realty & Mortgage Co., Inc. The 2nd quarter numbers look good on the surface. Falling supply, an up tick of most median single family prices in June ’09 and favorable 2-4 unit closing trends are making some buyers & investors happy. Given the common occurrence of multiple offers on many REO’s, the mood seems a bid too euphoric. Second quarter NOD’s in California were filed at a rate of 1,384 per day (yes that includes weekends) which was down from the 1 Q record rate of 1,522 per day. We expect a large increase in supply by the end of this year or the beginning of 2010. All this is happening while rents continue to soften and unemployment continues to rise.
Also In This Issue...
California’s NOD’s Heading For A Record Dataquick and others are estimating over 500,000 NOD filings in 2009. Given these numbers and the poor economic outlook for the Inland Empire relative to its key employment sectors, we believe the government’s effort to stem the tide of foreclosures is tantamount to trying to kill a grizzly bear with a fly swatter. The key question is “Will there be enough investors and buyers to absorb the next wave of inventory?”.
2-4 Unit prices remain low, however, the pick-up in closing numbers is encouraging. Prices were still soft as of the end of 2Q ‘09, however, Apple Valley prices were showing signs of leveling out. We found no sales of habitable 5+ unit projects in Adelanto, Apple Valley, Hesperia, or Victorville during the 2nd quarter of 2009. That makes 3 quarters in a row with no sales of habitable 5+ unit projects in these areas. The same culprits remain: lack of financing in the High Desert, and competition from low priced single family homes. Thus, asking prices are too high. Historic average asking prices based on GRM (annual) are shown below. GRM’s apply to active listings on the last day of each quarter.
Buyers Flock to Single Families
Sales volume continued to generally increase (above), while unemployment continued to rise (below).
We’ve gotten a lot of questions on short sale & foreclosure tax consequences. We’re not accountants so we can’t give any tax advice. Also, the rules are too extensive to present here since individual circumstances vary widely. Among other things, you need to know the meaning of terms such as “recourse” and “non recourse” debt, acquisition indebtedness, basis & basis adjustments, what is a “qualified principal residence”, etc. On the Federal level, the “Mortgage Forgiveness Debt Relief Act of 2007” was enacted and extended to the end of 2012 by the Emergency Economic Stabilization Act of 2008. Under this law, a discharge of certain “qualified principal residence indebtedness” is excluded from taxable income up to specified limits. According to Bob Tinz (Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters), “ . . . debt forgiven on second homes, rental property, business property, credit cards or car loans doesn’t qualify for this tax relief. In some cases, however, other kinds of tax relief (e.g., based on insolvency) may be available”. We found two decent links for Federal tax information on foreclosure and short sales as follows: http://www.realestateinvestingtax.com/shortsale.shtml California has different rules & limits. Be sure to check with your accountant or tax attorney when making your short sale decision. Know your tax consequences before you sell – especially if you have rental property.
Why You Need Us!
This is a different market. Things won’t be normal for a while. We monitor and participate in this market every day. We know what’s going on! This newsletter is only a small sample of data. Log on to our web site and check out more detailed trend data. See the buttons on the left side of the web page. Our trend pages will help you stay informed and help you with data you’ll need to make an informed decision. We have extensive experience with REO’s and short sales. If you’re a seller, we can walk you through the process thereby minimizing your disposition time. If you’re an investor, check with us first. We find many investors are over-estimating rent potential and occupancy levels. Our property management department can help you with realistic projections. Get the coverage you need on your property with our extensive posting on internet sites and several MLS and other listing databases. We have an extensive inventory of REO properties. Call us or check them out on our website. Contact Pam Wiest at Pam@WiestRealty.com or (805) 218-7227 for a market analysis of your property.
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